No Frills Mortgage
A no frills mortgage is just that: no bells and whistles attached. Perhaps you are tired of dealing with a mortgage that has too many extras. Bells and whistles may seem appealing at the onset of the negotiation, but can lead to more complications than they are worth.
Ultimately, finding the right mortgage for your needs means understanding what those needs are. There are so many different mortgages that it can be easy to get paired with a mortgage that does not properly fit those needs.
So, if your goal is to pay off the principal of the mortgage as soon as possible, then a no frills mortgage might be the best option for you.
What is a No Frills Mortgage?
Simply put a no frills mortgage is one of the most basic types of home loan that a borrower can get. And while it offers little in the way of flexibility, it also offers the potential for lower interest rates than just about any other kind of home loan.
With a no frills mortgage, the terms and the pre-payment options are quite minimal. This can be something of a disadvantage for borrowers that are looking for a home loan that they can adjust over time to fit their needs as they change.
What are the Advantages to a No Frills Loan?
There really is only one main advantage to a no frills mortgage and that is having access to lower interest rates. The lack of flexibility can turn off some borrowers, but there is something worth keeping in mind.
First-time home buyers might greatly benefit from this kind of loan. Think about it this way: if you know that you won’t be in that home forever, having access to lower rates to pay off the principal sooner can be a great thing.
This gives you equity in the home and allows you to sell it outright when it comes time to move into a different home. Having those lower rates can really save you money in the long-run and could be quite advantageous.
What are the Disadvantages to a No Frills Loan?
While having access to a lower interest rate can certainly save you quite a bit of money over time, there are drawbacks to this kind of mortgage, too.
Having minimal pre-payment options means that you may not be able to pay off the loan sooner than the original due date. There are some borrowers out there that pay substantially more against their loan in order to pay it down earlier; the options with this kind of loan are limited and at best there are a limited number of pre-payments available to the borrower.
There are also limited top-up options. What does this mean? For those who have built up equity in their home, there are loan options that allow for borrowing against that equity. With a no frills mortgage, those options can be quite limited.
Turnaround times can also be quite a bit longer with this kind of loan. If you are operating on a short turnaround when trying to get a certain kind of home, it may take longer than you thought to get a no frills mortgage.
How to know if a No Frills Mortgage is right for you
Like any other type of mortgage, there is no concrete answer to this question. The simple fact of the matter is that everyone’s mortgage needs are different and one type of loan can make a lot more sense than another.
A no frills mortgage can be beneficial for first-time home buyers that are not buying their forever home. Being able to save on higher interest rates can be quite appealing and there are some borrowers that definitely don’t miss those extra features.
If you and your family are looking for a forever home, it probably is not advisable to go with this kind of loan. Financial needs change over time and a no frills mortgage offers no flexibility for adjustment, pre-payment, or borrowing against equity.
How do I get a No Frills Mortgage?
Contact Super Brokers to speak with a mortgage professional that can help you decide if a no frills mortgage suits your needs. Whether a no frills mortgage is the best choice for you depends on your plans for the future, and how important home loan features are to you. Keep in mind that the minimum down payment is 5 percent with a maximum amortization of 25 years.
Whatever your decision, Super Brokers can assist in the process. Give us a call today to discuss your borrowing options and to find out what best suits your needs.