The Marquee Loop, Mortgage Myths

Mortgage Myths: You should always choose a mortgage based on the lowest monthly payment mortgage myth.

Yes, the statement “You should always choose a mortgage based on the lowest monthly payment” is a mortgage myth. While a lower monthly payment may seem attractive, it’s important to consider the broader financial implications and long-term costs associated with the mortgage. Here’s why:

1. Interest Rates: Mortgages with lower monthly payments may have longer terms or higher interest rates, which can result in paying significantly more interest over the life of the loan.
2. Loan Term: Mortgages with lower monthly payments often have longer loan terms, which means you’ll be making payments for a longer period. This can result in paying more interest overall.
3. Total Cost: Focusing solely on the monthly payment can cause you to overlook other costs, such as closing costs, origination fees, and private mortgage insurance (PMI). These additional costs can impact the overall affordability of the mortgage.
4. Financial Goals: Your financial goals and circumstances should also be considered. For instance, if you have the means to make a higher monthly payment, opting for a shorter-term mortgage with a higher payment could help you pay off the loan faster and save on interest.
5. Flexibility: Mortgages with lower monthly payments may come with restrictions or limited flexibility, such as prepayment penalties or limitations on refinancing. It’s important to understand the terms and conditions associated with the mortgage before making a decision solely based on the monthly payment.

It’s crucial to consider factors beyond the monthly payment when choosing a mortgage, including interest rates, loan terms, total costs, and your financial goals. Working with a mortgage professional can help you evaluate the various options and make an informed decision that aligns with your overall financial situation.