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LOAN AND DEBT
When you're looking for a mortgage, there are some mortgage problems you
should be aware of. While sometimes nothing to be concerned about, you should
know the impact they could have on your mortgage.
1 - Prepayment Penalties - These are popular with lenders because it protects
their income stream. When they quote you a mortgage, they are doing so with
the expectation that they'll be receiving an income stream from you for a
specified time period. As a precaution against that income being interrupted, and
as compensation in the event it does cease, they insert a prepayment penalty
clause into your mortgage contract. This stipulates that in the vent you pay off the
loan before the full term, you'll owe them a specified amount of money.
It sounds nasty, and it is. It can keep you from refinancing when interest rates
drop, your credit situation improves, or you want to extract some of your home's
equity. Unless you've no other choice, you should avoid mortgages with
prepayment penalties, even though they may carry a lower interest rate.
2 - Mortgages that are too large - Many times the broker or lender will allow
you to take out a mortgage that is simply too large for your income to support.
Sadly, this mortgage problem is all too common. It seems like a great idea at the
time, but after you move in it only takes a minor emergency for the awful truth to
sink in; you're house poor. You have little money to do anything but support
your mortgage payment. If any financial hardships come your way, you'll have
trouble even doing that. Try to keep the amount you finance to twice your annual
income or lower. In many metro areas this is, sadly, not very realistic anymore
unless you make a pretty hefty income.
3 - If you're shopping for a mortgage, make sure you carefully compare
products form different lenders. This is a great way to minimize mortgage
problems, because you'll quickly be able to determine if one mortgage offer has
issues the others do not.
These days, largely due to the power of the Internet, it's much easier to do this.
Several firms will actually do it for you. They allow different banks and other
lenders to bid for your business. It's advantageous for the borrower because the
lenders are well aware they're in a competitive bidding situation, and will bring
their best offer to the table. It's a winning situation for the consumer. One of the
first firms to use this business model was They are still offering this service that
can help ensure you get the best rate and fee structure on your mortgage. They
have a very simple form to fill out. You can do it in about 3 minutes. You'll get
offers back for your mortgage business very quickly too. Find out how much
money you can save by filling out the form.
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