Why the Best Mortgage Interest Rate May Not Always Be In the Best Interest of Mortgage Applicants

It is natural to want the best possible mortgage Interest rate when getting a loan

. However, applicants' circumstances and what they want to achieve with mortgage is a very important determining factor. Furthermore, the best interest rate mortgage on offer may come with strings attached to it that can not be seen by just looking at the rate. And two different mortgages available in the market may not be suitable for exact comparison.

Qualification requirements, fees, conditions attached to interest rates must be taken into account carefully. The mortgage interest rate may be lower, but the mortgage provider may make up for the lower rate by charging higher fees, higher early payment penalties and sell other products in conjunction with that mortgage. It is not uncommon for lenders to push their own home insurance and life insurance products as a condition of a mortgage. It could yet be worse if those add on products are not transferable or be kept stand alone should the mortgage be paid off. It would not be pleasant to find out when you get five years older that a new life insurance cover is required, if the mortgage to be refinanced somewhere else. The homeowner may develop a condition that can make life insurance much more expensive, too.

There are many introductory mortgage rates in the market for any given time. Like every other product, mortgages may have a short sale period. That may mean that at the end of a fixed period the offer will expire and completely different interest rate will apply to the mortgages taken. This is very common in the mortgage industry.

For example, you can not compare rate of a fixed rate mortgage with a rate of flexible mortgage as both of those mortgage products serves completely different risk profile in terms of interest rate change expectancy. A mortgage applicant who is not comfortable with interest rate fluctuations will not be served better with a flexible rate mortgage, how much ever its rate may be lower. In addition, fixed rate offers a guarantee that rate will remain the same for a long time. Should there not be such guarantee with other product, this makes the other low interest mortgage product cheaper for just now! Who knows which one will end up the best rate.

Mortgage applicants must have a clear idea of what they want to accomplish with mortgage. Are they looking for a long term or a short term mortgage? Are they keen to fix the rates or comfortable with the flexible rates? Are their credit score and employment history perfect to qualify for the best rate? Are they prepared to put enough down payment or prefer to borrow more? All those questions must be answered to find the best mortgage product for the applicant. It is not as simple as just finding the best mortgage rate.

Why the Best Mortgage Interest Rate May Not Always Be In the Best Interest of Mortgage Applicants

By: JS Lee

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