Getting a mortgage is an important and necessary step when purchasing a home. You should also be aware of how crucial it is to get out of a mortgage as well.
Here are some things to keep in mind:
Fees: Ask questions. What fees will you pay up front and down the road? Fees can include administration, appraisal and legal fees, and you should have full disclosure on fees you may incur. Be especially aware of APR (Annual Percentage Rate) fees, which is the actual cost of borrowing including any fees you were charged.
Penalties: What kind of mortgage penalties could you incur? Your penalty could be 3 months of interest, or it could be the IRD (Interest rate differential). This could cost you quite a bit of money, and usually happens when you commit to a specific interest rate and then want to break the terms of the mortgage. When this happens the bank’s rate drops significantly lower, which would short change the lender profit you’ve committed to them.
Portability: Fixed rate mortgages are generally portable. Variable mortgages that are portable are a little more difficult to find. If you choose a variable mortgage, having this feature could save you thousands of dollars in the long run if you decide to sell before your mortgage ends. Find out if you’re eligible for a pro-rated blended rate on your next mortgage if you sell before the maturity date.
Discussing these issues with a mortgage professional will help ensure that you will be protected down the road.
