A mortgage contract is usually the largest financial event in most people's lives. And yet I'm convinced that the majority of people will spend more time researching and evaluating the purchase of a toaster oven than they will with the details surrounding their home purchase.
And as we've certainly seen in recent times with the housing market plummeting and the recession setting in – signing the dotted line can carry with it some tremendous consequences.
Hence the thousands of foreclosures every month across North America. The bottom line is that people are either neglecting to make an informed decision, or plain and simply biting off more than they can chew.
And you definitely do not want to end up on the short end of the stick if your property purchase gets complicated or “close to the line” as time goes on.
Here are three simple mistakes that cost many, many people thousands – and they're so simple to avoid...
1. Neglecting to Shop Around – Without a doubt, this is where most people get literally “hosed” when they could likely save a literal fortune over the course of their mortgage – just by shopping around. Lenders differ greatly from one another, and while some target a certain borrower with competitive rates, others target a different demographic (such as revenue properties, etc.).
Just because the lender is a “brand name” bank or a familiar name, does not mean they have the best loan for you. It's simple math – and literally all you need to do is compare quotes and find the lowest interest rate you can, with an agreement that's fair.
It's just like researching a toaster, except it could be the difference between losing your house or building wealth. Well worth doing!
2. Agreeing to a Questionable Loan – If a broker or “professional” wants you to go with a questionable loan structure (such as interest-only, adjustable rate, 50 year term, etc.), make sure you know the fine print inside and out. And moreover – make sure you realize what you're getting into.
Just because it's easier to “afford” if you go with an adjustable rate, doesn't mean you can't get stung badly if interest rates suddenly jump – which they can.
Similarly, a 50 year term might seem like an easy way to get “in”, but carefully consider what the “catch” is, and not just the hook. (For example – how easy is it to get out of the loan when you have a better income and want to refinance to a more favorable term length?)
3. Staying With the Same Lender Indefinitely – This is a big one. The vast majority of borrowers simply renew with their existing lender when the maturity date rolls around. And yet most often, the market has changed enough by that time that there's far better rates available from someone else!
By simply doing this each maturity date (usually every 5 or so years), which takes perhaps a few hours of your time and a phone call to your broker – you can literally save thousands of dollars a year, and possibly even lower your mortgage payments by hundreds per month!
Well, worth doing, folks.
So there you have it.
The 3 biggest mortgage blunders that most people haplessly commit without so much as a second thought.
And perhaps that explains the present real estate crisis, particularly in the US.
By simply taking a the time to even conduct basic research into your pending mortgage, and carefully evaluating the terms of the loan, you can save yourself thousands of dollars (likely annually), and perhaps even save yourself from eventual financial hardship.
With a stroke of a pen you can create wealth, or set yourself up for disaster. And the amazing part of it all is that it's literally a choice. But it's up to you to figure out your options, which are well worth your while.