Terminology Tuesday – Introductory Rate Offers! What are They – Do The Math!
Introductory rate offers are not new, banks have offered them in the past however it has been quite some time since that type of special rate term was made available.
The way it usually works is the lender will offer a low interest rate for your mortgage that will be lower than the best rate offered for a full five year term. An example is usually for 6-9 months and then the rate will go up for the remainder of the term which is almost always based on 5 year mortgage term. That interest rate for the remainder of the mortgage term is higher than the best discount rate rate that you would have gotten had you choose not to go with the introductory rate. If you calculate out over the full 5 years, taking that introductory rate and then being given the higher rate almost always comes out to much more than if you had taken the regular discount rate offered for the 5 years.
Beware of these offers as they look good, can make the first months of your mortgage payments lower so therefore attractive especially for your first months in your home. Remember though, after that introductory time is over your rate is going up and will stay up for over 4 years!!!!
Call Brenda or Jessica at Advance Mortgage In Red Deer to discuss!!! We have access to many lenders who offer a variety of mortgage rates and products!!