Choosing a mortgage is an important decision. What questions should you ask your lender before signing on the dotted line?
What is the current prime interest rate? This will tell you what the prime rate is and from there you will be able to determine a trend in the interest rates based on a few year's worth of prime rates to help you determine which mortgage is best for you.
What is the current interest rate you are offering on fixed rate mortgages and what would the payments be? The answer to this question will tell you what your payments would be for the term of the loan. The interest rate will be higher than an ARM mortgage, but will remain consistent throughout the life of the loan.
What is the current interest rate you are offering on ARM mortgages? The interest rate on an ARM mortgage will be considerably lower than that of a fixed rate mortgage.
What is the term of the principal interest rate for the ARM mortgage and how often will the interest rate be up for review? The term for the principal interest rate, usually one, three or five years, will determine how many years you are left with the current rate until the interest rate is reviewed and changed. The interest rate will then be up for review at an interval of usually one to three years.
Can we financially afford an increase in the ARM mortgage interest rate? Ask your lender if you will be able to afford the capped increase in the interest rate should it rise to that level when the interest rate is up for review.
Can we review the terms and conditions of the ARM mortgage? Ask your lender to go through all of the conditions and terms of the adjustable rate mortgage with you. Ensure that you understand all of the ins and outs of the mortgage before you sign on the dotted
line.
