Cheap Mortgages and Loans Traps
Filed Under Cheap Mortgages |
Let’s take a look at some cheap mortgages and some of the traps that come with them. When shopping for cheap mortgages and best mortgage deals, the lenders will set teaser or what I like to call them ”traps”. Below we will cover some of the well known traps. It is very important that you recognize these traps, if you don’t, then getting the best mortgage deals will be out of reach.
We will start with prepayment penalties. When you are narrowing down your choices of loans make sure you keep an eye out for prepayment penalties. What are the negatives of prepayment penalties?? One major negative is when you try to refinance your loan, now if you have no intention of refinancing your loan then you really don’t have anything to worry about.
Now we will cover the basic negatives of cheap mortgages and Interest Only Loans. Interest only loans are a great idea if you will sell the home in couple of years or sooner, many home flippers would choose this option because it requires less money upfront. Now, interest only is a terrible idea if you plan to keep your house for longer period of time, because you will build no equity and if the market slows down or collapses you will be in deep trouble and will be most likely upside down on your cheap loan thats not very cheap anymore.
Next up is the worst option possible for cheap loans and it should only be used by real estate investors. I’m talking about Negative Amortization Loans, these loans can make you or break you . When making a payment on a conventional loan you’re paying down interest and balance of the loan. The Negative Amortization loan adds to your loan balance while keeping your payments as low as possible. If you want the best mortgage deals, then this should be you last choice. Many borrowers got way over their heads with this type of loan. i would pretty much avoid this loan type and not use it as an option.
The new kid on the block of cheap mortgages tricks is 50 year loan, yes, that’s right 50 years. If you calculate a $500,000 loan and compare payment differences between a 30 year loan and a 50 year loan what do you think it will be?? It will be about $200 dollar difference. You will be better of going with interest only loan, because the payment difference will be the same.
Mortgage Glossary
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