Having been an expert in the mortgage industry for some time, I find that I am asked quite a few of the same questions by nearly every client.
These frequently asked questions will vary slightly from client to client, but the general questions are still the same:
Which mortgage product or loan is best for me?
Should I go with a fixed or adjustable rate mortgage?
Should I secure an open or closed mortgage?
While these are not the only mortgage related questions I get asked, they are asked more than most, which is why I have chosen to include them in this post and explain them a little bit below.
Asking the first question about mortgage products will not get you a very productive answer if you ask it too early in the process. The answer to this question will vary based the borrower – the smallest difference in circumstances can lead to big differences in loan options.
Before asking what mortgage loan is best for you, take some time to get to know your mortgage broker. Explain your situation and let them know your goals so they have a better grasp on your current finances and where you want to be in the future. Make sure to provide as much information as you can, because the more information you provide, the more specific your broker can get with her advice and with the options for your mortgage loan.
The answer to the second questions is quite similar to the first. Both fixed and adjustable rates can be great options depending on your particular situation. There are some reasons why a fixed rate mortgage may be better – think rising interest rates and long-term payment schedules – and there are some reasons why an adjustable rate mortgage may be better – think predictions of lower rates in the near future or plans to quickly re-sell your home.
The basic difference between an open mortgage and a closed mortgage is that with an open mortgage, the borrower may borrower more money from the lender at a later date. Of course, certain borrowing criteria must be met before the lender will agree to lend additional funds, but this can be a great option if you are hoping to be able to make upgrades to your home or finance another large purchase in the future. A closed mortgage, on the other hand, imposes restrictions on the borrower, often requiring some sort of fee for pre-payments or refinances, but can reward borrowers with a lower interest rate.
You may also be wondering about the term of your mortgage or about how your payments will work. If so, don’t hesitate to ask! Regardless of how many times I may have heard a question, I am always happy to answer it again, especially if it means helping my clients feel more confident about their mortgage process.