 |
 |
 |
           |
 |
 |
 |
|
 |
 |
|
|
|
 |
Mortgage-Refinance Treachery: Avoid Mortgage Bankers and Brokers Biggest Trick -- The Sales Pitch
What the average homeowner or home buyer fails to realize is that bankers, loan officers, mortgage brokers, or whatever your lenders call themselves, are salesmen. Certainly, if you purchased your home from a realtor and used her lender, you most likely got a feeling of trust in that person, because the realtor referred him. Beware of this potentially dangerous water. "This guy will help you complete your loan," the realtor will tell a prospective buyer. "He'll help us close quickly, and you'll be in your new home in less than a month." Suddenly, the banker is a guy who will help you. Now, he's your friend. The intention here is not to scare you into thinking that everyone in the mortgage business is a bad person, looking to rip you off, but don't trust this guy, just because a realtor sends you to him. Remember, they work together. The realtor needs the sale, and the banker needs to make loans. They are both salesmen, and salesmen are people who make commissions, based on a particular price. This goes for loan officers, just the same as it goes for a realtor or a car salesman. That used car salesman makes more if you pay more, and the mortgage banker makes more, based on how high your interest rate is. When I worked in the mortgage business as a full-time loan officer and sales manager, the average customer was far more concerned with the costs of completing the loan and the final monthly payment than with the interest rate on the money they were borrowing. This is one of the biggest mistakes home buyers and people refinancing make in completing a home loan. Unfortunately, most Americans live from one payday to the next, barely paying the bills, so all they're concerned with is what the monthly payment will be and if it will fit their budget. Bankers feed off of this, as it becomes easy to simply fit a loan into a payment schedule, ignoring interest rate, altogether. In fact, most people make it easy on the mortgage broker, asking more questions about payments than about interest rates. The unsuspecting borrower will say, "I can't pay more than $1,000 per month." The cunning loan officer will feast on this person, like a starving man at a Thanksgiving dinner. Remember, bankers and mortgage brokers keep secrets, advising in ways that appear to save you money but really cost you thousands in the long run. Let's assume the previously-mentioned person needs $100,000 to purchase a home. An unscrupulous mortgage broker, looking to make as much money as possible on the borrower will find out how much the taxes and insurance will be on the property. Let's assume they are $230, which will be added to the person's monthly mortgage payment. Let's also assume that the market bears an interest rate of 6% for a 30-year fixed rate mortgage (more on terms later). Now, the mortgage broker says to the borrower who can only afford $1,000 monthly, "What if I get you into your house for less than $900, including taxes and insurance? Can we do the loan today?" This person, dying for his chance at the American Dream, is going to jump at this, thinking the mortgage broker is his new best friend and ignoring the interest rate on the loan, altogether. What the broker, trying to steal every possible cent from this one deal, has done is sold the borrower a $100,000 loan at an interest rate of 7%, which creates a principal and interest payment of $665.30 monthly. Combine this with $230 in tax and insurance escrows for a monthly mortgage payment of $895.30, almost $105 less than what the borrower said he could afford - a pretty nice savings, the borrower will think. Think about it; if you said you could afford no more than $1,000 per month, and the person, in whom you placed your trust, told you your payment would be $895, you'd probably be pretty excited, huh? What has really happened, though, is the mortgage broker has done the borrower, his valued customer, a great disservice. Why, you may wonder. Because the market for this model bears an interest rate of 6%, and we're assuming the borrower has good credit. The loan officer could have offered the far better 6% rate, which would create a payment of $829. This is $66 less than the borrower's payment at 7%. Also, the 7% rate will cost the borrower an extra $792 each year ($66 times 12 months). That is nearly $4,000 over five years! All this, just so the mortgage broker could pocket a few hundred dollars more on this one deal. If the loan amount was much higher, you could lose tens of thousands of dollars in just a few years. So, what is the big secret? Simply put: bankers and mortgage brokers do not always offer the best possible interest rate, because they make money, when you get a higher interest rate than the market bears! So, be careful of this old trick. Tell your mortgage professional that you want the Par rate. This is the best rate the lender is willing to offer on a given day, without charging a premium. In other words, you could get a better rate, but you'd have to pay to get it. Now, if you are caught off guard and sold a rate that is greater than Par, your payment will be bigger and the loan officer will make extra money. Don't let it happen. Mark Barnes is the author of the new novel, The League, the first work of fiction, based on fantasy football. He is also an investment real estate and home loan finance expert. Learn more about his suspense thriller at http://www.sportsnovels.com. Get his free mortgage finance course at http://www.winningthemortgagegame.com
MORE RESOURCES:
Mortgage-Refinance - Google News |
|
|
|
RELATED ARTICLES
How to Get a Cheap Homeowner Loan If you're looking for a cheap homeowner loan, you might be wondering what you can do to reduce the amount that you have to pay.The simplest answer lies in two things? shopping around to find the lender that offers the lowest interest rates on a cheap homeowner loan, and maximizing the value of your loan against the equity in your home that's being used as collateral. Bridging Finance Basics Bridging finance is a short-term loan that is used as a way to provide funding for the purchase of a new property while the borrower awaits the sale of an existing property. Unless all the stars are in perfect alignment, it's tricky to coordinate the sale of one property and the purchase of another property so that the transactions occur simultaneously. How To Determine The Price Of Your Home Why is it that some homes sit on the market for a year while others sell like hot cakes? Frustrated sellers will blame a bad market, while a good real estate professional will tell you that many times, a slow sale is often attributed to the listing price.If a home is overpriced, buyers will stay away. Advantages Of Mortgage Pre-Approval There are several advantages to getting mortgage pre-approval before looking for a home.Being pre-approved for a loan lets you know how much you can borrow towards a home, your agent can help you find a home within the loan amount you're pre-approved for, and a seller of a home is more likely to accept your offer than someone who has not been pre-approved for a loan yet. Obtaining a Home Equity Loan Online Private lenders, banks, and mortgage companies are all setting up shop on the internet, and all make it possible to obtain a home equity loan online. Competition between lenders is stiff, so be sure to check a few companies that offer applications about their rates, products, and customer service. Finding the Online Homeowner Loans You Want Online homeowner loans have been growing in popularity in recent years, blossoming into a new industry of online lenders and new opportunities for homeowners who find themselves needing additional money but not wanting to pay an exceptional amount on interest.These online homeowner loans use the equity that you've built up in your house as collateral to secure the loan, and usually feature interest rates and loan repayment terms that are competitive to if not better than many loans that are offered by more traditional physical lending institutions such as banks and finance companies. Mortgage Sales Hit Problems The housing market has been buoyant over the past few years, but mortgage providers and first-time buyers are both now facing a tough time. Following announcements from the Bank of England that there has been an overall decline in the total number of UK home-buyers, and a declaration from the Financial Ombudsman Service (FOS) that the number of disputes concerning mis-sold mortgage endowments has now hit record levels, it seems that mortgage lenders are facing a bleak time. Thought You Can Go All Alone In Mortgages! Mortgage Advice Beneficial In All Important Decisions Mortgages are easy as long as you understand them well. But how many borrowers can be confident of their knowledge of mortgages. Guide to Interest Only Mortgages Here is a useful guide to interest only mortgages. An interest only mortgage is one where your regular payments only go to pay off the interest on the money you borrow. Home Equity Loan - Is It For You? A Home equity loan has become an easy way to not only pay off other non-deductible debt, but to come up with large wads of cash for remodeling projects, vacations and more. People have financed college educations with a home equity loan, so your imagination is your only barrier. Mortgage Prepayment Penalties - Just Say No One of the most common terms found in a new home loan is a prepayment penalty. This type of penalty says that if the borrower pays off the loan early, commonly during the first five years of the loan, then the borrower will be responsible for paying an additional amount of money, typically about six months interest on 80% of the mortgage balance. Apply For Home Mortgage Loan Online With Bad Credit - Things To Consider So, you've found the perfect home. You've already decided where to place each piece of your furniture inside the home, and in your mind, all of your family photographs are hanging alongside the stairwell. What is a Current Account Mortgage? Current account mortgages are fairly new to the sector. They are quite different to other types of mortgage as they enable you to set off all your savings and debts in one single account. Reverse Mortgages: When Is One Right For You? How do you know if a reverse mortgage is right for you? The answer depends on your current financial situation of course.But other factors such as your medical condition and lifestyle are important in determining whether or not a reverse mortgage is your best choice compared to a home equity loan, a line of credit, or just selling your home. Home Equity Loans - Research Your Lender Carefully Real estate prices are rising across the country, and Americans are tapping into their home equity like never before. Americans took out $431 billion in home equity loans in 2004, and that amount may increase in 2005. How to Utilize Your Cash Investment in Your Home Have you ever noticed how hard it can be to get to the equity in your home?Recently I had a client come to my office who had quite a bit of equity in their home. I'm not talking about $50,000 or even $200k, I'm talking about over $250k. Thinking About Refinancing Your Loan? Refinancing your home or property is a big decision that could drastically affect your financial future, for the good or the bad, depending on how smart you go about the process. Take the time to explore all of the different refinancing options you have available to you. Types of Financing for Your Mortgage When financing a home purchase, the kind of mortgage you choose determines your monthly payment and the interest rate you get on your loan. There are four main ways of financing the mortgage for your home: 30-year fixed rate, 15-year fixed rate, adjustable rate, and interest only. Home Equity Increases $1 Trillion in Five Years - Is the Market Peaking? A new survey reveals that in the last five years, the equity in the California real estate market has increased by more than one trillion dollars. A trillion dollars is a large number to ponder, but put in concrete terms, it can be represented by a stack of one hundred dollar bills that is six hundred thirty one miles high! This astronomical increase in California home values isn't all that unique, however. Consolidate Your Debt With a Home Equity Loan and Improve Your Credit Score A home equity loan is a loan based on the difference between what your current home value is and what you currently owe on your house. There are also mortgage companies that will loan a little over the equity you have in your home.
|
 |