If you are refinancing your mortgage there are a number of mistakes that will cause you to overpay for your new mortgage loan. Doing your homework and researching mortgage lenders will help you avoid making these mistakes. Here are three things to watch for when refinancing your home loan.
I. Watch Out for Balloon Payments
If you accept a mortgage with a balloon payment you will be required to pay the amount due on a date specified in your loan contract. If you are unable to make this payment you will have to refinance the loan or sell your property to avoid foreclosure. Mortgages with balloon payments are typically used by real estate investors as a source of short term financing; however, predatory mortgage lenders use them as part of a ploy to take your home. Unless you know exactly what you are getting yourself into avoid any home loan with a balloon payment.
II. Watch Out for Excessive Fees & Rates
If you are a homeowner with poor credit you can expect to pay more for your new mortgage. There are lenders that will take advantage of your credit and charge you excessive fees and rates. Some Predatory lenders try and sell bad credit loans to homeowners with good credit in order to charge higher rates. The only way to know what fair rates and fees are for a homeowner in your financial situation is comparison shop from a variety of mortgage lenders. When you comparison shop the right way it is easy to spot mortgage lenders that are trying to take advantage of you. You can learn more about comparison shopping for the best mortgage by registering for a free mortgage guidebook.
III. Be Careful With Adjustable Rate Mortgages
Adjustable rate mortgages have more risk than traditional fixed rate mortgages. Many homeowners are enticed by the introductory rates and low payment amounts; these homeowners often don’t realize their payments will go up significantly at the end of the introductory period. In addition to this payment increase, the mortgage lender will adjust your interest rate periodically and change your monthly payment depending on prevailing interest rates.
You can learn more about your home loan options by registering for a free mortgage guidebook.
By: Louie Latour