What to Look for in a Low Interest Home Loan
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I should just take out a low interest home loan, right?
When you look for home loan rates, don't be fooled by seemingly low interest mortgage loans--a low upfront rate doesn't necessarily mean you've found the best deal. In fact, when you find a low interest home loan, you may end up stumbling into a potential minefield. When comparing rates and considering a low interest home loan, be sure to watch for the following:
- Early payment penalties: Some loans penalize borrowers who pay off their balances early. Be sure to avoid these so you have the freedom to pay your loan off early or refinance without penalty.
- Adjustable Rate Mortgages (ARMs): Your initial loan rate may be low, but if you sign up for an adjustable rate mortgage, your low rate isn't locked in for the life of the loan. As a result, you could face substantial increases in the future.
- High closing costs: Closing costs are often a fact of life when looking for home loans, but they don't have to take that big a bite out of your bottom line. Be wary of a low interest home loan with very high closing costs. Try to negotiate the costs or look for something more reasonable.