To listen to most people discu their mortgages, you would think that the only thing that influences
To listen to most people discu their mortgages, you would think that the only thing that influences the total cost of their mortgage is the rate. You've heard it, at parties, at over the fence conversatio : "What rate did you get on your mortgage?" "I got a mortgage rate (taux hypothcaire) of ____%". Yet it has been shown that, given the same parameters (credit history, length of mortgage, payment terms, etc), the average difference between mortgage rates is about .06%. On a $100,000 mortgage, that amounts to $41.12 per year.
We all know by now that interest rates charged on home loa (prt hypothecaire) and all other types of loa are determined by credit ratings. Why, then, with all the discu ion about credit ratings and credit scores, are we still so nave as to believe that one lending i titution will look at our credit rating and say 7%, and another will look at that same exact credit rating and say 6%? Credit ratings are based on the risk the bank faces when it lends money to you (and, more importantly, the risk it faces about whether it will get paid back). There is a higher premium over their cost of funds if they risk that you will pay slowly or not at all, and a lower premium if you are a good risk. As a result, the range of rates, based on the same type of credit rating, is very small. It hardly seems worth the trouble to save such a small amount, does it? E ecially if you, like most people, look all over the internet for hours to find out all of the rates that are being offered out there.
There is a more important factor to look at. I tead of solely relying on obtaining the lowest interest rate, a mortgage borrower should be concentrating on following the correct "mortgage strategy". There are various mortgage strategies that one can follow, from fixed to adjustable rate loa (taux hypothecaires), balloon loa or prime rate based loa . Working with a mortgage lender who is knowledgeable about economics, looking at yield curves and who studies your individual situation to devise the perfect mortgage strategy for you is going to save you a great deal more money over the life of your home loan. It can probably save you te of thousands of dollars in total mortgage costs, rather than le than $100 per year.
Why do banks only talk about interest rates when there really i 't that much of a difference between rates? Because that is the easy way to attract borrowers. Developing an entire mortgage strategy for a customer takes a lot more in terms of understanding and analyzing markets, mortgage products, individual needs and a host of variables. Many bankers and mortgage brokers have neither the time nor the expertise to perform this in depth services for their customers.
Need to know more? You can get more details and understand how this concept can be true by reading the following article.
We all know by now that interest rates charged on home loa (prt hypothecaire) and all other types of loa are determined by credit ratings. Why, then, with all the discu ion about credit ratings and credit scores, are we still so nave as to believe that one lending i titution will look at our credit rating and say 7%, and another will look at that same exact credit rating and say 6%? Credit ratings are based on the risk the bank faces when it lends money to you (and, more importantly, the risk it faces about whether it will get paid back). There is a higher premium over their cost of funds if they risk that you will pay slowly or not at all, and a lower premium if you are a good risk. As a result, the range of rates, based on the same type of credit rating, is very small. It hardly seems worth the trouble to save such a small amount, does it? E ecially if you, like most people, look all over the internet for hours to find out all of the rates that are being offered out there.
There is a more important factor to look at. I tead of solely relying on obtaining the lowest interest rate, a mortgage borrower should be concentrating on following the correct "mortgage strategy". There are various mortgage strategies that one can follow, from fixed to adjustable rate loa (taux hypothecaires), balloon loa or prime rate based loa . Working with a mortgage lender who is knowledgeable about economics, looking at yield curves and who studies your individual situation to devise the perfect mortgage strategy for you is going to save you a great deal more money over the life of your home loan. It can probably save you te of thousands of dollars in total mortgage costs, rather than le than $100 per year.
Why do banks only talk about interest rates when there really i 't that much of a difference between rates? Because that is the easy way to attract borrowers. Developing an entire mortgage strategy for a customer takes a lot more in terms of understanding and analyzing markets, mortgage products, individual needs and a host of variables. Many bankers and mortgage brokers have neither the time nor the expertise to perform this in depth services for their customers.
Need to know more? You can get more details and understand how this concept can be true by reading the following article.
