Avoid falling into the trap of a “bad” mortgage by looking out for these things.
It’s important to think long-term when buying a house.
After all, you wouldn’t buy a house with no yard if you eventually wanted to buy a dog, and you wouldn’t look into rural houses if you were thinking of finding a job in the city.
In the same sense, it can be just as important, if not more so, to think long-term when obtaining a mortgage. While variable interest rate mortgages may offer a low rate now, could you afford it if rates went up? Does having the option to pay back your mortgage earlier than expected matter to you? Are you currently seeking other investment properties and will this mortgage hinder your ability to do so?
Just as life changes, so do your finances. Therefore, you should consider all facets of your mortgage agreement before going through with it. To avoid the common pitfalls of mortgages, here are 6 mortgage-related things to look out for:
Here are 6 mortgage-related things to avoid:
- A fully-closed mortgage: You cannot change the terms of the mortgage as long as you own the property.
- Add-on insurance premiums: You can increase your mortgage cost by adding on insurance payments.
- Prepayment penalties: This prevents you from paying down your mortgage faster and costs you more over time.
- Limited access to equity: If you need to access the equity you build up, this could be a deal-breaker.
- Teaser rates: Some mortgage products start with a low rate, but only last for the first year. Then rates can go higher than other lenders’ advertised rates, costing you more money in the long run.
- Lack of flexibility, particularly for financing additional properties: Are you interested in investment properties? If so, you may be interested in purchasing more property. Some mortgages will restrict your access to financing for future purchases.
Do your future self a favor by looking into each offer you receive, and considering how it would fit into your plans and goals. Contrary to popular opinion, even loans with low interest rates may cost more in the long run if they have hidden fees or inconvenient rules.
For more help with your mortgage or for any questions about mortgaging mistakes, contact us any time at Shop Your Own Mortgage.
This summary references an article by Dalia Barsoum, “6 Mortgage Traps to Avoid,” originally published in Canada Real Estate Wealth Magazine September/October 2016.