Lowest rate and lowest monthly payment

One of my clients recently asked me for a loan with the best interest rate and the lowest monthly payment. Well this is a trick question because those two things are often wrongly associated with each other. Most people want to lower their mortgage payment and they wrongly assume that this equates to the lowest interest rate available. While the interest rate on your mortgage loan is extremely important equally important are the terms under which you are required to pay back your mortgage. One of the most important but often misunderstood and overlooked terms is the amortization term. This determines whether you pay principal and interest, interest only, or maybe even defer interest with negative amortization. This sigle apect, the term of your mortgage loan, is the greatest factor influencing the amount of your monthly payments. So it would make sense to have control over this right? Well there are loans avaiable that give you a choice each month regarding under which term you will pay. Now these loans may come with a slightly higer rate, which is the price you pay for flexibility, but think of the consequences if you run on difficult times. With a standard 30 year fixed rate mortgage for $400,000 at 6.5% you are obligated to make a monthly payment of $2514.65 each and every month regardless of any circumstances that life might toss at you. What if you considered some sound financial advice and looked at a loan that still had a 30 year fixed rate but came with payment options each month. What premium in interest rate would you pay for the option to be allowed to only have to pay $1714.44 a month for that same $400,000 loan? That is over $800 a month lower than the standard 30 year fixed rate. Would you pay an extra .7% or $2800 per year to have this option? If you have doubts about the timing or amount of your future income or want to keep your family safe in the event of a financial emergency then this is a loan program for you to consider. Or maybe you want to invest your money in other places to grow your net worth. These are the types of forward thinking questions you need to ask yourself when considering the type of mortgage loan that is best for you and your family. If you would like an analysis of your unique financial needs please send me an e-mail or drop me a line.