At Indigo Mortgage, we get Colorado borrowers who call and say they have received emails or ads with mortgage interest rates to purchase or refi their home as low as 1.75%. They ask if we can offer them that kind of low interest rate.

Our response is that we can offer any interest rate they want, but that to get those really low rates, they need to determine how much they want to pay in order to buy down that rate, or if they’re interested in an adjustable-rate mortgage.

Lenders who advertise super low rates like 1.75% are being dishonest in what they are offering. If borrowers look at the fine print in that offer, they’ll notice that a 1.75% rate comes with a huge buy down of three to four discount points, a 10-year term, or an adjustable rate mortgage. In other words, there’s a catch.

For example, on a $250,000 mortgage loan, the cost to get that $1.75% rate will be $7,500 to $10,000 extra just to buy the lower interest rate; that doesn’t even include title fees and escrow funds they’ll need at closing.

In that example, the borrower would be financing a total of about $15,000 to $20,000 to get that rate, adding to their monthly mortgage payment over the life of the loan. If they choose a 10 year term, it will still come with a buy down. If they choose an adjustable rate mortgage, the lower rate is only good for 3-5 years before the interest rate goes up.

There are many gimmicks that unscrupulous mortgage lenders can use to get the borrower to call or send a contact form from their website. Before you know it, you can be in a bad deal or find that the lender’s story changes if too many questions are asked. To avoid this trauma, shop your mortgage around, including a local lender like Indigo Mortgage, and see what true interest rate and costs should be.