Getting mortgage is anything but easy! First, mortgage rates are too fluid, tumbling up and down all the time. Second, the competition in the mortgage is fierce and it becomes difficult for the borrowers to differentiate good lenders from the bad ones.
If your lender shows haste while asking you to lock in your rate, pushes you to choose a mortgage plan by pressure tactics or pulls you in by luring you with a specific mortgage plan, it’s a red flag! You are most probably running into a bad deal. A bad lender never wants you to know the not-so-good propositions associated with a plan. Here are six things your lender might not tell you while offering a mortgage plan.
1). The Real Costs of No Closing Costs Loans
The no closing costs mortgage, also known as no fee mortgage, is not as cheap as advertised. More often than not, lenders use it as a bait to lure the potential borrowers. In a typical no fee mortgage, the borrower is not charged of the usual fees such as processing fee, appraisal fee, underwriting fee and so forth. But in lieu of that, the borrower gets the mortgage at a higher interest rate. You might land yourself in a trap if you decide to choose a no fee mortgage without having a proper understanding of its eventual costs.
2). The Fine Print
Most of the borrowers tend to skip the fine print, not only because it seems like hard work but also because many lenders don’t want them to go through it at all. But it is very important to understand the mortgage plan in the finest details before you lock in your rate. Only when you go through the fine print, you can get the ins and outs of the total costs involved in a plan. Giving a pro-active attention to fine print make sure that you don’t end up getting unpleasant surprises later!
3). The Pre-Payment Charges
Most of the lenders won’t tell you about the pre-payment charges until you ask them about it. The reason is quite simple, when the pre-payment charges are out of the picture, a mortgage plan looks a more attractive proposition than it really is. The longer you take to pay back your mortgage, the richer is the interest they get to earn. Now when you decide to pay back earlier, you actually end up eating out their interests. So, get to know the pre-payment charges involved in a plan before zeroing in!
4). The Perks of Refinancing a Mortgage
It’s only human to get tempted by lower interest rates and for the right reasons, a decrease in the interest rate as low as 0.1% can lead to substantial savings in the long run. Your lender tags a high cost with refinancing and assume that it will stop you from switching to another lender. But considering the savings it offers, refinancing is all worth it!
5). Individual Fees Involved
What the lenders offer is the total cost of the package but what they keep from you are the individual fees and charges involved. You have to make sure you do not pay for nonexistent services. Moreover, when you know what all are you paying for, you are in a better position to negotiate.
6). The Prevailing Rates in the Market
And most importantly, the lenders don’t want you to compare the mortgage rates. They are less bothered about your specific needs and more about the specific plans they offer. Only when you shop around, you get to know if your lender is offering the best rate in the market. As a matter of fact, it’s not just about getting lower rates, but other factors as well. Online comparison portals suggest a mortgage plan that specifically fits in your needs and preferences.
The most likely reason why your lender makes one mortgage plan look more attractive than the other, it’s not because it is; but because your lender might be earning a heavier commission on one plan over the other. The more questions you ask your lender, the lesser will be the chances of you getting lured into buying a mortgage plan that doesn’t work for your financial needs. So do not get tempted to lock in your mortgage until you clear your doubts and have complete trust in your lender.
Here’s the takeaway tip – Choose your lender on the basis of what he tells and even more importantly on the basis of what he doesn’t!