|
ARTICLES
Consider
Options Before Selecting Your Mortgage
Purchasing a
home will probably be the largest investment any one of us will
make in our lifetime. Considering how very important this decision
is, I am surprised at how often people base their decision making
process on two issues: loan approval and interest rates. Granted,
these two options are important, but there are other, equally significant
options and alternatives to look at and think about.
Over the past
decade, the mortgage industry has gone through many changes and
trying to keep up with these has almost become a full-time job!
I will, however, try to clarify the changes by reviewing some
of the most often selected privileges and options:
Let's look
at prepayment privileges:
- What percentage
of the loan can be repaid each year?
- Is prepayment
allowed with or without penalty?
- Is the
percentage of prepayment based on the original loan amount or
on the balance outstanding?
- Will prepayment
privileges be granted at any time during the year or only on
the anniversary date?
- Can monthly
payments be increased? By how much? How often?
- Can payments
be made on a monthly, bi-monthly, or even weekly schedule?
- Are extra
payments allowed at regular intervals?
These are
only some of the prepayment options you should consider before
you commit yourself to any one mortgage. There are three equally
important alternatives you should also be looking at:
1)
An Assumption Clause
This allows
a subsequent purchaser of your home to assume the existing financing.
This feature is very beneficial when the property is listed
for sale and current interest rates have been raised even higher
than the existing mortgage rate.
2)
A Transferable Feature
This permits
a borrower to transfer the mortgage loan from the present property
to another home of equal or greater value. In the event the
purchaser of your home doesn't wish to assume your mortgage,
you can keep your preferred rate and terms by simply transferring
the mortgage to your new home.
3)
A Discharge Provision
Is rarely
available through institutional lenders. The clause allows you
to repay the loan, in full, at any time before the maturity
date, with a maximum penalty of three months interest on the
outstanding balance. The mortgage lender will then provide a
discharge of the loan. The homeowner regains free title, which
is very important.
Some of these
mortgage privileges and options may have a price attached to them,
resulting in a higher interest rate on your loan. HOWEVER,
each option should be carefully considered in light of an individual's
personal lifestyle.
Always ensure
that any options/privileges are stipulated IN WRITING
and that you fully understand the extent of each and every provision
designated. Above all, never forget to read the fine print before
signing on the dotted line, because once you've committed your
signature to that document, you can't change your actions without
a good deal of time and, most probably, expense.
For further
information, please contact us at your
convenience.
GRG
Financial Services Inc.
Return
to main Articles page
|
