A borrowing strategy is an intelligent approach to finding your first mortgage or refinancing to purchase a new home.
The best loan consists of far more than the cheapest interest rate. A better approach is to track down the most suitable deal for your circumstances.
America has an incredibly well-serviced market for home loans. And while this is a great strength of our country, it can be a challenge to conduct thorough research.
Some 20% of all home loans are now organized through mortgage brokers, who represent a selection of banks and lenders. The majority of the market still gravitates to one of the major institutions, such as Wells Fargo, or more contemporary alternatives such as United Shore, Freedom Mortgage and loandepot.com.
But if you’re a first-time buyer and wondering how to go about this challenge, here are eight observations to get you thinking about your borrowing strategy.
No lender is the same
Lenders don’t have identical risk profiles or products. So, don’t be surprised when you get a variety of responses when you approach each one for a loan.
Common trap
The lowest interest rates often come with the most inflexible loans. Be careful not to trap yourself in an arrangement that’s more expensive to you in terms of life choices than the saving on your interest rate.
Seek flexibility
Flexibility is essential in a mortgage because your circumstances will change over the years. For example, you may want a loan that will allow you to pause payments during ill health or time to have a baby. Early cancellation of a loan can incur fees.
Fixed Rates
This term reflects the cost of borrowing money. When your rates are fixed, then the cost of your borrowing is stable. Your mortgage repayments will be consistent. When rates are low, many borrowers ask the bank for a fixed rate.
Variable Rates
Your payments can go even lower if the cost of borrowing falls further. That’s a win for you. But all coins have two sides: rates can go up, and that hits your cash flow. Talk to your mortgage broker or lender about the best option for your circumstances.