Low Interest Rate Mortgage
How to find a mortgage with a low interest rate
A low interest rate mortgage offers borrowers the opportunity to save thousands of dollars over the life of the loan. Mortgages with a low or sub-prime mortgage interest rate tend to be available through independent brokers and specialty financial institutions, offering cash-strapped people an attainable home ownership option.
However, you need to exercise extreme caution when shopping for a low interest mortgage. The terms, conditions and fine print need to be carefully reviewed to ensure you're actually getting as good a deal as you think you are.
Advantages of a Low Interest Rate Mortgage Loan
The primary attraction of a low interest rate home mortgage is the possibility of realizing huge savings. When it comes to a loan of several hundred thousand dollars amortized over a period of 10, 20 or 30 years, a difference of even a fraction of a percentage point can add up to astronomical savings.
If you're offered a mortgage at lower than the current interest rate, you should be aware of some of the tricks that unscrupulous lenders use to lure unsuspecting consumers into disadvantageous mortgages.
Hazards and Pitfalls of Low Interest Mortgages
Before you sign a low interest rate mortgage agreement, it's advisable that you have a lawyer review the fine print unless you have a strong command of finance-related terminology. These contracts are often overlaid with complicated terms and conditions that can put you on the hook for a lot more money than you initially thought.
Here are some of the catches that less-reputable low interest mortgage lenders might try to use:
- Teaser interest rates. Some lenders advertise a low mortgage interest rate, but you'll actually only get that rate for a short time. After the introductory period expires, the actual rate of the mortgage leaps to a higher level than you'd have gotten had you just gone with a regular fixed or variable rate mortgage from a reputable lender.
- Hidden fees and penalties. While you may get a low rate, your mortgage might be fraught with hefty upfront fees and huge penalties for missing payments, selling your home early or making extra payments.
- Rates dependent on credit. Some lenders will only offer their lowest rates to borrowers with perfect credit. If you have bad credit, or if your credit score ever slips below a defined threshold, much higher interest rates will kick in with the potential to send you into a downward spiral of debt.
- Switch-outs on advertised rates. Interest rates are subject to change all the time, and some lenders will use that fact to get you in the door with a low advertised rate before applying high-pressure sales techniques to get you to sign off on a mortgage with a higher interest rate.