Hot tips on how to avoid pitfalls of a low-interest mortgage
Don’t be fooled by claims of low-interest mortgages; get all the details before signing on the dotted line.
17:07 19 March 2013
Most of the time low-interest is considered a great thing when you’re spending money. Low-interest means your payments are less per month and more of your money goes towards the principle.
It’s easy to get carried away by a low-interest rate when shopping for automobiles or homes, but make sure to check all the aspects of that low-interest mortgage before you get stuck with a deal that isn’t as great as you thought it was.
Here are a few things to watch out for when shopping for the best interest rates:
- Look for a low-interest rate mortgage with a fixed rate.
- Watch out for “balloon” payments which require a large payment every once in a while, or tacked onto the end of your mortgage.
- Check interest rates for a stepped increase that will end up giving you a higher interest rate as you get nearer to paying off your mortgage.
- Consider the amount of time of the mortgage. If you’re able to find a low-interest rate, with a manageable payment for 15 years instead of 30, you may prefer to choose that over the 30 year mortgage.
- If you find a fixed low-interest mortgage, try to obtain all of your funding from that source.
- Find out maximum and minimum loan amounts, as well as the maximum loan value.
- Look for penalties for paying off your mortgage early and factor that in. A higher interest rate without the penalty may work better for you, if you plan to pay it early.
While most of the time you want a low-interest mortgage, follow these tips to make sure you avoid surprise balloon payments or higher interest rates.