In last week’s column, several important mortgage concepts were examined. This week, we will discuss other essential components of choosing the mortgage that is right for you. As was discussed last week, many consumers fail to carefully explore a great variety of mortgage options made available by lenders who are eager for their business. What follow are some more terms to consider when exploring your many mortgage options:

Open and Closed Mortgages: An open mortgage is one which allows you to pay off as much of the principal amount of the loan as you wish, at any time and without penalty. Contrast that with a closed mortgage, which does not offer this benefit but usually comes with a lower interest rate than an open mortgage of the same term.

Fixed or Variable Rate: A fixed rate mortgage allows you to budget precisely for whatever term you select, while a variable rate mortgage will fluctuate with market conditions. If you are on a tight and fixed budget, a fixed rate may be suitable for you.

Prepayment Privileges: Prepayment Privileges allow you to pay your mortgage more quickly. By making a lump sum payment you can greatly reduce the amount of interest you will pay over the life of the loan, and thereby save yourself money. There are as many variations of prepayment privileges as there are lenders. Typically, one annual prepayment of up to 10 or 15% of the original amount borrowed is allowed. Such prepayments are most effective at the beginning of the mortgage, when most of your payments are going towards the interest portion of the debt and very little of the principal portion of the debt is being reduced.

Portability: This is extremely important for long-term mortgages because a portable mortgage eliminates the financial penalty involved when you break the mortgage prior to maturity, which is often the case when you purchase another property. If you have a portable mortgage, you will be able to port or move the mortgage with you to your new property.

Weekly or Bi-Weekly Payments: One of your main goals is likely paying off your mortgage as soon as possible. Many consumers are astounded to learn that by making only the regular monthly payments as called for in their mortgage agreement, they will pay thousands of dollars more than they need to in interest payments. Along with taking advantage of your prepayment privileges, you should consider making weekly or bi-weekly payments instead of monthly payments. The reason for this is that by doing so, you will end up making an extra monthly payment each year, saving you about five years of payments over the course of a twenty-five year mortgage.

Prior to committing to book your mortgage with a particular lender, you should shop around. Many consumers are unaware that lenders are very eager for their business. Aside from sometimes providing a discount of at least one-half a percentage point from the posted interest rate, lenders will offer you other incentives to obtain your business. You should compare lenders and negotiate the best deal possible. If there are fees involved in setting up your mortgage, ask the lender to consider waiving them. Choosing a mortgage is really no different than shopping for any other product or service. Carefully consider all of your options and try to make an informed decision.