Mortgage decisions are based not only on the price of the property, but also on the interest rate and loan terms, including payment options.
Most buyers are focused on price negotiations, but when it comes to the loan they may settle for a minor saving on interest rates and take the loan with the longest term without thinking more carefully about the total cost to them.
These decisions can be made with professional assistance from a mortgage broker with many lending relationships, or who may themselves be a lender. Shopping alone for the best terms to cut your total mortgage interest can be a time consuming exercise. Professional experience can get you information quickly, and also help you gather every advantage.
Often, a consumer who may be unfamiliar with mortgage details makes the choice of a lender without full knowledge of the options available to them.
For example, when you meet with a broker, ask them to calculate how various loan terms will affect the overall borrowing cost. Get a calculation of the total interest cost as it applies to all the options being considered.
Once you see the choices, you may want to choose an accelerated payment schedule of perhaps 15 years. The monthly payment will be higher, but the interest payment savings can be significant.
Your professional mortgage broker may recommend terms of at least five years on your loan if you are concerned about the effects of rate increases. For the time being, 30-year fixed-rate loans are still available with good interest rates. If the Federal Reserve acts to attack inflationary pressures this year, these lower rates may disappear.
Finally, a strategy session with a mortgage broker can help to ensure loan terms with prepayment conditions that allow regular extra payments. These are applied directly to reduce the principal without incurring penalties. Even small amounts paid to the principal can have an impact on total interest cost.
Premiere Mortgage has offices on Maui and Kaua‘i and provides a wide range of services to the real estate community. Tricia Morris may be reached on Maui, in Kihei, at 874-8800, Wailea, at 891-8900, West Maui at 665-8800, on Kaua‘i at (808) 822-2300, or toll-free at (800) 813-7711.