While many people are initially attracted to a mortgage rate that’s 10 bps or more below other rates in the market, many clients don’t realize that those low rates typically signal a no-frills product that comes with significant limitations on what the borrower can do within the contract terms.
No-frills mortgages are stripped-down to eliminate features that add costs.
Typically, no-frills products are designed to appeal to purchasers who are highly cost-sensitive, such as those who might not qualify at higher rates, and first-time buyers with limited opportunities to make prepayments.
When choosing a No-Frills mortgage product you typically give up the following:
· No frills is fully closed
· Prepayments limited in amount and number of times you may make prepayments
· No top-up options
· Long closings
· No pre-approvals and longer-than-average approval times
· Limited choice of lender
While there is nothing wrong with choosing a no-frills product, just ensure you are aware of the limitations of no-frills and contact me to determine whether no-frills is, in fact, the right product for you.
Remember, not all mortgages are alike and ensuring the right fit with your needs is essential.