Mortgage lenders are getting creative to keep rates low, but here’s why homebuyers should beware

Online comparison shopping is changing everything from how we buy a new television set to how we select a mortgage, and it’s causing some mortgage lenders to get creative in order to compete. One such example, is that lenders are now stripping away great features of mortgage to get their rates low.

Consumers have always been keen on obtaining a low mortgage rate, but with the ease of shopping for mortgage rates due to the internet via multiple devices such as computers, smartphones & tablets have created an even greater fixation on rates.

Mortgage Brokers agree that the push for low rates is not a bad thing, but clients may not be fully aware of the different mortgage products available. Mortgage contracts used to be fairly standardized, but many of them now contain various conditions and clauses, which confuse consumers. It's very easy to see what the rates are, but much more difficult in understanding why.

Lenders are offering extremely low rates but attach much steeper penalties for paying off a mortgage early. Chasing those five extra basis points, buyers put themselves at risk of having to pay a penalties of thousands of dollars down the road.

One credit union mentioned that the mortgage market has come ultra-competitive, and the need to offer an extremely low rate is necessary to grab consumers attention, but once the flood of calls come rolling in, most consumers end up taking a mortgage product with a little bit of a higher rate to avoid these stripped down, low rate products.

Click here to read the full article at the Financial Post.