Everyone wants the lowest rate, right? At least, that what I hear most of the time. I think it’s because borrowers want to get the best possible “deal”, and think if they have gotten the lowest rate, then they have done a good job of shopping.
But would you walk into a pharmacy and ask for the cheapest medicine in the store, regardless of what the medicine it is? Not if it did not solve your illness!
First, you would consult with a physician or pharmacist to determine the best prescription to solve your problems. Then the physician or pharmacist would determine if the prescription works in harmony with any other medications, and what the correct dosage is to solve the problem.
OK, so now you know what the prescription is. Give me the lowest cost, you say. Well, the lowest cost will be on a 30 year supply of that medication. Do you think you should always buy a 30 year supply? Of course not!
The same holds true for getting the best mortgage.
First, we need to assess your total situation, and recommend solutions that solve both your immediate needs, and future needs. Second, we need to help you make sure that your mortgage is not in conflict with your other goals, both current and future. Finally, we help you balance the question of rate, cost and loan program, to allow you to get the best possible outcome.
So, let’s examine the Rate vs. Cost issue.
Generally, the longer you expect to hold a loan, the better it is to pursue a lower rate strategy; the shorter you expect to hold a loan, the better it is to pursue a low cost strategy. Before I provide examples, it’s important to get a few misunderstandings cleared up.
According to statistics from Freddie Mac, the average length of a loan for the past 5 years has been 2.5 years. Most people believe that the average period is much longer, and probably believe that they will hold the loan longer than they actually do. Ask yourself: How long has it been since you last refinanced? Since you have owned property, how many loans have you had? That should give you an idea of how long you will hold a loan.
Most (nearly ALL) borrowers choose the wrong strategy. According to a 2007 Penn State study, 98.6% of borrowers did not hold their loans long enough to benefit from paying points. I promise to give you better advice than those borrowers got!
More and more financially savvy borrowers are realizing that their home mortgage, and the equity they have built up in their home, are financial tools, not financial burdens. I promise to show you how to get the most out of your mortgage, and your home equity.