What Is The Best Deal For A Mortgage?

Borrowing hundreds of thousands of dollars for your dream home can be a bit daunting. With all that money involved, what is the best deal for a mortgage should be front and center in your mind?

What Is The Best Deal For A Mortgage?

What is the best deal for a mortgage? Well, it depends on a number of factors. Yes, I realize you do not like that answer. It is not simple, but there really is not a simple answer when it comes to finding the best deal. You may initially think interest rates, fees and the length of the loan are the key elements, but that is not particularly true.

There are a number of factors that come into play when trying to find the best deal on a mortgage. One is how much money do you have for a down payment? The second is how long will you live in the home? Let's take a closer look.

The amount of money you can afford to put down on a home is critical. If you intend to own the house for a significant amount of time, say seven years or more, you want to put more money into the initial financing. Why? Well, doing so lowers the total amount you are borrowing and your monthly payments. If you are cash rich, you should first put down at least 20 percent because the lender will then not require you to buy private mortgage insurance. If you can afford to put down more than 20 percent, however, you may not want to do so. Instead, you should consider putting down 20 percent and then using the excess cash to buy down your interest rate. Yes, a lender will reduce the interest rate if you pay them to do so. Since you will pay hundreds of thousands of dollars in interest over the long-term, buying down your rate by even a quarter or half percent can save you an absolute bundle. We are talking hundreds of thousands of dollars.

Another key factor in getting the best deal is time, to wit, how long do you intend to own the home? If you are looking long-term, you can use the strategy in the previous paragraph. If you are going to only own for a couple of years, however, you want an entirely different loan. Your best strategy is to go for an adjustable, interest only loan. This loan should start with the lowest interest rate charged on the market by lenders. This will result in a much lower monthly payment. As the name suggest, you will not be paying off any of the principal on the loan. While this may cause you concern, the simple truth is you will not pay off much principal in two to three years with a traditional loan, so why throw away the money? Obviously, this strategy is only useful if you are going to flip a home in one to three years.

It goes without saying that every situation is different. While these strategies are time-tested and work, your particular situation may call for something else. The best solution is to speak with a mortgage professional. Explain your situation and ask them to present you with scenarios. They should provide you with two to three loan options that detail your monthly payment, total interest paid and so on. You loan packages are tailored to your specific situation, so you can pick the best loan for you. This is how you go about figuring out what is the best deal for a mortgage. You can get a free, no obligation consultation here.

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