‘No frills’ products aren’t all they’re cracked up to be. Many mortgage brokerages right now are offering ‘no frills’ mortgage products — products that offer customers a lower rate while taking away the benefits of lump sum payments, portability and assumability.
It’s understanding why these products might be appealing. After all, during these economic times who has the extra cash to put down a huge lump sum payment? And who needs a portable mortgage if they’re not planning on moving until the market picks up?
The thing is, you can still obtain great mortgage savings without giving up the perks of traditional mortgages. For starters, many lenders are willing to give significant discounts if you opt for a 30-day close.
By switching to biweekly or weekly payments, and by obtaining a variable rate mortgage but increasing your payments to match those of the going five-year fixed rate, you’ll be ahead of the 0.1% discount of a no frills product within three years.
‘No frills’ products are a great example why interest rates are not the only factor in deciding whether or not to take a mortgage. Much like buying a car, you get what you pay for. If you don’t want a car with air conditioning, a stereo, a cupholder, or airbags, then you can get the cheapest car going…but you might regret it later.