When choosing a mortgage loan most people focus on the interest rate more than on any other factor of the loan.
The lowest interest rate, however, does not always mean you pay less money.
Hidden fees, rising interest rates or prepayment penalties can cost you a fortune over the term of the loan.
Understanding when to recognize a bad Mortgage loan may save you a lot of money in the long run.
Variable Rate Mortgages (VRMs)
Variable Rate Mortgages make buying a home easier, especially for first-time home buyers, but you have to understand what you are agreeing to.
Most VRMs start out with a low introductory interest rate that can climb as interest rates go up.
Unless you are prepared to pay a higher payment later on this type of Mortgage can turn out to be dangerous for you.
It is especially difficult for those who can barely afford the loan to begin with.
Prepayment penalty
Paying off your Mortgage loan early can save you thousands of rands in interest but not if
there is a prepayment penalty clause in your contract.
Make sure there is no such clause before you sign your loan papers otherwise the bank can charge you enormous fees for paying off your loan.
Most people don't think they can ever pay off a Mortgage loan early at the onset of the loan but your circumstances could change. It would be a shame to be penalized for trying to save yourself some money.
Lower interest rates
If you are being offered an extremely low interest rate then you should investigate why.
Ask for a quote so you can see what the closing costs (initiation & legal fees, insurance etc.) will be.
Many times a lender will add exorbitant closing fees to a loan to make up for the lower interest rate.
High interest rates
If you know your credit score is good and you are still being quoted higher than normal interest rates then don't take the first loan that comes your way.
Shop around. Do your homework and make sure you know what the current prime rate is and the rates of several lenders.
A home Mortgage loan is a very long commitment and you don't want to make that commitment with the wrong lender...
When I wanted to switch my bond my bank wanted to charge me R43,467 in cancellation fees!
ReplyDeleteThe loan modification process can be frustrating and confusing for many distressed homeowners. But you have to know what exactly is loan modification. A loan modification is a permanent change in one or more terms of a borrower's home loan. Mortgage
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