If you’re looking for a mortgage either to purchase a home or to refinance, you may see or hear ads offers of low rates or payments. They may look like they are from your mortgage company or a government agency but whether you see these on the Internet, TV or they come by e-mail or in your mailbox you should be cautious. While the offers seem tempting some are terribly flawed: they don’t disclose the true terms of the deal as the law requires.
To help you recognize an offer that may be less than complete, the Florida Mortgage & Loan wants you to know the buzz words that should trigger some question marks and follow up questions so you know what information to insist on after you’ve read the ad.
A LOW “FIXED RATE”
Ads that tout out a “fixed” rate may not tell you how long it will be “fixed”. The rate may be fixed for an introductory period only, and that can be as short as 30 days. When you shop for a mortgage, you need to know when and how your rate, and payments, can change.
Very Low Rates
Are ads talking about a “payment” rate or an interest rate? This important detail may be buried in the fine print. The interest rate is the rate used to calculate the amount of interest you will owe the lender each month. The payment rate is the rate used to calculate the amount of the payment you are obligated to make each month. Some offers advertise a low payment rate without telling you that ie applies only during an introductory period. What’s more, if the rate is less than the interest rate, you won’t be covering the interest due. This is called “negative amortization”. It means that your loan balance is actually increasing because you’re not paying all the interest that comes due, and the lender is adding the unpaid interest to the balance you owe.
Very Low Payment Amounts
Ads quoting a very low payment amount probably aren’t telling the whole story. For example, the offer might be for an Interest Only (I/O) loan, where you pay only the amount of interest accrued each month. While the low payment amount may be tempting, eventually you will have to pay off the principal. Your payment may go up after an introductory period, so that you would be paying down some of the principal or you may end up owing a “balloon” payment, a lump sum usually due at the end of a loan. You must come up with the money when a balloon payment is due. If you can’t, you may need another loan, which in turn means new closing costs and potentially points and fees. And if housing prices are falling you might not be able to refinance to lower your payments.
Teaser Rates
• Mortgage rates near 30-year lows!
• Rates as low as 1%!
• You are paying too much!
• Who doesn’t want to reduce their mortgage payments?
• Loan amount $300,000 – pay only $900 per month!
Ads with “teaser” short term rates or payments like these don’t often disclose that a rate or payment is for a very short introductory period. If you don’t nail down the details in advance about your rates and payments for every month of the life of your loan, expect payment shock when the rate and payment increase dramatically.
Official Lookalikes
• Important notice from our mortgage company.
• Open immediately - Important financial information enclosed.
• Please do not discard – account information enclosed.
Appearances can be deceiving. Mailers that have information about your mortgage and your lender may not be from your lender at all, but rather from another company that wants your business. Companies can legally get your information from public records. Before you respond to any offer, review it carefully to make sure you know who you’re dealing with.
• You are eligible to take part in an exclusive government loan program. We can negotiate your existing adjustable rate mortgage to a new low fixed rate mortgage. You must contact us immediately regarding this notice.
Some businesses use pictures of the Statue of Liberty or other government symbols or names to make you think their offer is from a government agency or program. If you’re concerned about a mailing you’ve received, contact the government agency mentioned in the letter. If it’s a legitimate agency – and not one that just sounds like a government agency - you’ll find the phone number in the Blue Pages of your telephone directory.
No comments:
Post a Comment