As mortgage rates start to decline, many borrowers naturally aim for the lowest rate possible when refinancing. While this instinct makes sense, it’s crucial to look beyond just the rate. Focusing solely on securing the lowest rate without considering the costs involved can lead to costly mistakes. At Indigo Mortgage, we advise borrowers to take a closer look at the full picture of their loan and avoid falling into the trap of making low rates their sole priority.

The Hidden Costs of a Low Mortgage Rate

Many lenders advertise exceptionally low rates to attract borrowers, but these rates often come with significant costs, such as high buy-down fees. For example, a borrower might be offered a rate in the 6% range, but the lender may neglect to mention the price tag attached to securing that rate.

We recently worked with a borrower who shopped their mortgage around. Another lender offered a slightly lower rate than Indigo Mortgage but required a $12,000 buy-down fee to achieve it. This added cost not only increased the loan amount but also reduced the cash-out amount available to the borrower by $10,000.

At Indigo Mortgage, we were able to provide a loan with a slightly higher rate but without the excessive costs. Our offer saved the borrower thousands of dollars and made much more financial sense. This is why it’s essential to look beyond the advertised rate and consider the overall cost of the loan.

Don’t Let Low Rates Become an “Idol”

The problem arises when borrowers make low rates their sole focus—what we call making the rate an “idol.” This can blind them to the bigger financial picture, including the upfront costs and how these costs impact the overall value of the loan. Borrowers should approach refinancing with a balanced perspective, ensuring they factor in closing costs, loan terms, and cash-out potential alongside the interest rate.

Shop Around for the Best Overall Deal

The best way to avoid being misled by low-rate offers is to shop around and work with a trusted mortgage broker. At Indigo Mortgage, we prioritize transparency and provide borrowers with offers that truly benefit their financial situation.

Unfortunately, some lenders—like the “pocket-sounding” online lender we frequently encounter—use low-rate offers to lure borrowers, only to burden them with high costs later. By shopping around and including Indigo Mortgage in the mix, borrowers can confidently compare offers and ensure they’re getting the best deal, not just the lowest rate.

Indigo Mortgage: Your Trusted Local Partner

As a trusted local mortgage company in Albuquerque and throughout New Mexico, Indigo Mortgage is here to help you make informed decisions. We believe in honesty, transparency, and providing the best options for our borrowers. If you’re considering refinancing, let us guide you toward a loan that balances a competitive rate with reasonable costs.