When the best rate isn't the best deal

Many of us have been taught that the lowest interest rate must always be the best deal when it comes to borrowing for a home mortgage. However, in some cases, that may not be true. At this point you are probably thinking this has to be good. The truth is, it is.

Often times First Time Home Buyers will have a down payment of less than 20%. Typically this down payment would require PMI (Private Mortgage Insurance). This insurance has a cost which can increase the cost of the mortgage significantly. When you factor the cost of PMI insurance on top of the interest rate, your true cost of money could be significantly higher.

Compare that loan to a loan with just a slightly higher interest rate and NO PMI insurance. In most cases, the loan with NO PMI insurance will have a lower effective cost of money then the loan that had the lower rate with PMI insurance. This is all true because the interest rate you are generally quoted does not take into account the effective cost of money when PMI is figured into the calculation.

The other thing that clients can often overlook is what are the cost associated with the loan. A lender can offer substantially lower rates then most of their competition. However, in many cases the cost of the loan offsets the lower interest rate and makes for no big deal.

Navigating the shark infested mortgage waters is no easy task. You need to have the benefit of a seasoned mortgage professional who is truly looking out for your best interest.

I welcome the opportunity to show you your mortgage financing options. Give us a call if we can help.