Home buyers, especially first time home buyers, often purchase a variable rate mortgage because of the significant savings over fixed rate mortgages. Depending upon the market, the difference between an initial rate on avariable rate mortgage and a fixed rate can range from 1 to 1.25 percent. That's a significant savings, whether you are a first time homebuyeror purchasing your third or fourth home.
The trick to making a variable rate mortgage work for you is to purchase a variable rate mortgage with an option to convert to fixed rate at some point in the future. When the interest rates cycle down, switching to a fixed rate mortgage ensures you keep your payments low, even after rates begin to rise again. Do you have the expertise to time your decision correctly? Are you confident you'll receive the most competitive fixed rates available and that you are being offered sound financial advice?
Buyers often assume that the big 5 banks will treat them fairly by giving them a better discount because of their long-term relationship with the bank. What they don't know is that the big institutions and credit unions don't have any incentive or obligation to do so.
Contrary to what buyers believe, many banks have no obligation to give you their prime market rate. Many bank agreements do not state in the contract that you will receive their best rate. Instead, at conversion from variable rate mortgage to fixed rate mortgage, banks often offer a posted rate or a rate that is slightly discounted off the posted rate. Because of this, buyers can end up paying more interest than they need to, ultimately losing money over the life of the loan.
Let's examine a situation where a buyer has a $250,000 mortgage with a 25-year amortization. They have a five year variable rate mortgage and decide to lock in after one year. Converting to a fixed rate mortgage after one year at .25 percent higher than the best market rate equals $625 per year in additional interest costs. Over four years the buyer will pay an extra $2500 in interest. Over 25 years that amounts to $15,625. If you could save even a portion of that amount, isn't it worth at least a phone call to Averbach Mortgages?
Mike Averbach says, 'Buyers assume incorrectly that their big bank will treat them fairly or give them a good discount because they are long-term customers.' What buyers don't understand is that the big institutions and credit unions have NO incentive or obligation to give you, their customer, their best rate. In fact, because they need new business, they have more incentive to treat new clients better than existing ones. You are at their mercy if you refinance through them and they know it!
As an existing client, once you sign the agreement, the mortgage is already a done deal; you are essentially locked in. If you want to convert, the bank can offer you their posted rate - NOT necessarily their best rate. If you, the client, decide to seek financing elsewhere you will probably be charged a penalty. It's a win-win situation for the bank. You, however, are left paying more in the end.
How do you prevent paying too much? Make sure that your mortgage agreement has that crucial clause that states the 'Client will get the best available rate upon conversion to a fixed-rate mortgage.'
Many mortgage brokers work with lenders (like ING, First National, MCAP and Merix) who are willing to make a commitment in writing they will offer their clients their best rate whenever they choose to lock into a fixed rate mortgage. Even knowing this, some brokers still offer variable mortgages from the big banks purely because of brand recognition.
Don't take a chance regarding one of the biggest financial decisions you'll ever make. Call Mike Averbach at 604-710-2550 or email him: mike@averbachmortgages.com. Justin Blacklock can be reached at 604-736-1855 and by email: justin@averbachmortgages.com. Mike, Justin and the entire Averbach Mortgages team are available at your convenience. Call them today.
The trick to making a variable rate mortgage work for you is to purchase a variable rate mortgage with an option to convert to fixed rate at some point in the future. When the interest rates cycle down, switching to a fixed rate mortgage ensures you keep your payments low, even after rates begin to rise again. Do you have the expertise to time your decision correctly? Are you confident you'll receive the most competitive fixed rates available and that you are being offered sound financial advice?
Buyers often assume that the big 5 banks will treat them fairly by giving them a better discount because of their long-term relationship with the bank. What they don't know is that the big institutions and credit unions don't have any incentive or obligation to do so.
Contrary to what buyers believe, many banks have no obligation to give you their prime market rate. Many bank agreements do not state in the contract that you will receive their best rate. Instead, at conversion from variable rate mortgage to fixed rate mortgage, banks often offer a posted rate or a rate that is slightly discounted off the posted rate. Because of this, buyers can end up paying more interest than they need to, ultimately losing money over the life of the loan.
Let's examine a situation where a buyer has a $250,000 mortgage with a 25-year amortization. They have a five year variable rate mortgage and decide to lock in after one year. Converting to a fixed rate mortgage after one year at .25 percent higher than the best market rate equals $625 per year in additional interest costs. Over four years the buyer will pay an extra $2500 in interest. Over 25 years that amounts to $15,625. If you could save even a portion of that amount, isn't it worth at least a phone call to Averbach Mortgages?
Mike Averbach says, 'Buyers assume incorrectly that their big bank will treat them fairly or give them a good discount because they are long-term customers.' What buyers don't understand is that the big institutions and credit unions have NO incentive or obligation to give you, their customer, their best rate. In fact, because they need new business, they have more incentive to treat new clients better than existing ones. You are at their mercy if you refinance through them and they know it!
As an existing client, once you sign the agreement, the mortgage is already a done deal; you are essentially locked in. If you want to convert, the bank can offer you their posted rate - NOT necessarily their best rate. If you, the client, decide to seek financing elsewhere you will probably be charged a penalty. It's a win-win situation for the bank. You, however, are left paying more in the end.
How do you prevent paying too much? Make sure that your mortgage agreement has that crucial clause that states the 'Client will get the best available rate upon conversion to a fixed-rate mortgage.'
Many mortgage brokers work with lenders (like ING, First National, MCAP and Merix) who are willing to make a commitment in writing they will offer their clients their best rate whenever they choose to lock into a fixed rate mortgage. Even knowing this, some brokers still offer variable mortgages from the big banks purely because of brand recognition.
Don't take a chance regarding one of the biggest financial decisions you'll ever make. Call Mike Averbach at 604-710-2550 or email him: mike@averbachmortgages.com. Justin Blacklock can be reached at 604-736-1855 and by email: justin@averbachmortgages.com. Mike, Justin and the entire Averbach Mortgages team are available at your convenience. Call them today.
Good Job Admin.......