Is less more when it comes to mortgages?

While No-Frills mortgage products typically offer a lowerinterest rate when compared with many other available products, the lower rate is really their only perk.

This type of product will only be ideal for you if you have no plans to take advantage of benefits that will help you pay off your mortgage faster – such as pre-payment privileges, including lump-sum payments.

No-Frills products also won’t let you take your mortgage with you if you purchase another property before your mortgage term is up. Portability is an important option that could save you money over the long term if the home of your dreams is within your reach before your mortgage term is up and rates have risen, which they have a tendency to do over a five-year period.

It’s understandable why these products may seem appealing. After all, during tougher economic times, who has the extra cash to put down a huge lump-sum payment? And who needs a portable mortgage if they are not planning on moving until the market picks up? But it’s important to remember that a lot can change over the course of five years – or whatever term you choose for your mortgage. You could get transferred, find a bigger house, have babies, change careers, separate from your spouse, etc. Five years is a long time to be anchored to something.

Many people won’t sign a cell phone contract for longer than two years that they can’t get out of, so why would they then sign a mortgage for five years that they can’t get out of?

You can still obtain great mortgage savings without giving up the perks of traditional mortgages. For starters, many lenders are willing to offer significant discounts if you opt for a “quick close,” which means that you complete the transaction within a determined period offered by the lender (usually within 30 or 45 days).

There are other ways in which to save more money. For instance, by switching to weekly or bi-weekly mortgage payments, by obtaining a variable-rate mortgage and increasing your payments to match those of the current five-year fixed rate. By implementing some of these tips you will be far ahead of the savings from a No-Frills mortgage interest rate.

No-Frills products represent a great example of why interest rates are not the only important factor to consider when deciding whether to opt for a particular mortgage product. Much like buying a car, you get what you pay for. If you don’t want a car with air conditioning, a stereo, a cup holder, and so on, then you can get the cheapest car going… but you will likely regret it later.

That’s why it is essential to discuss the full details surrounding the small print behind the low rates. It’s also important to take into account your longer-term goals and ensure your mortgage meets your unique needs now and into the future. As Mortgage Experts, we will help you find that balance by finding the best mortgage for you.