Adding To Your Mortgage Adds Up
For a first time home buyer, determining the best mortgage rate on the market is often the only thing the new loan shopper will be looking for. Although shopping for a great rate is an important step in determining what loan to choose, it’s equally important to keep your principle as low as possible. Many mortgage brokers will try to add on unnecessary expenses, to raise the overall cost of your loan.
Mortgage brokers and financial institutions will often try to sweeten the pot by offering to lower your monthly expenses by rolling them into your loan. Expenses like closing costs, taxes and home insurance will satisfy your pocketbook with short term gain, but often, the bank is the one that benefits. When shopping for a loan, always think long term. Otherwise, you are letting lenders take money out of your pocket.
Even though mortgage brokers may dazzle you with these promises of excellent rates and low monthly bills, be aware that these incentives often come with a hidden price tag. When a lender offers to lower your monthly bills with this method, they are really offering to let you pay more interest on items you shouldn’t be paying for with credit. The reason? These short term expenses can cost you when tacked onto long term loans.
When you pay off a long term loan, most of the money you pay in your monthly mortgage goes towards your interest, rather than principal. This interest is a substantial expense, as in most payment structures, anywhere from seventy to eighty percent of your payment goes to pay off just interest! That means your monthly payment is barely bringing down your principal.
If you are only paying 30% of your monthly principle, imagine how long it will take to knock down the amount you owe. Hmmm… maybe somewhere around thirty years? As long as your principal stays large, your interest payment will stay large, too. This cycle will prohibit you from paying off your loan quickly and in the end you will pay for your house several times over.
That’s why you need to be cognizant when hunting for a loan. Even if your house was not that expensive, mortgage brokers and lenders will try to find ways to raise the amount of money you borrow. They will try to convince you to include or “wrap” certain expenses into your home loan.
Although rolling payments into your mortgage may seem attractive in the short term by lowering your monthly, out of pocket expense, avoid it wherever you can. The price of adding unnecessary costs to your principle is not worth the short term gain. Remember, it will take years before the majority of your payment even gets to your principal loan.
When shopping for a mortgage lender, express these concerns openly. If your mortgage lender is willing to give you a great rate and promise to avoid wrapping unnecessary expenses into your loan, that’s the lender you should be working with. If not, shop around.
Your time is your money. Make the most of it.
Mortgage brokers and financial institutions will often try to sweeten the pot by offering to lower your monthly expenses by rolling them into your loan. Expenses like closing costs, taxes and home insurance will satisfy your pocketbook with short term gain, but often, the bank is the one that benefits. When shopping for a loan, always think long term. Otherwise, you are letting lenders take money out of your pocket.
Even though mortgage brokers may dazzle you with these promises of excellent rates and low monthly bills, be aware that these incentives often come with a hidden price tag. When a lender offers to lower your monthly bills with this method, they are really offering to let you pay more interest on items you shouldn’t be paying for with credit. The reason? These short term expenses can cost you when tacked onto long term loans.
When you pay off a long term loan, most of the money you pay in your monthly mortgage goes towards your interest, rather than principal. This interest is a substantial expense, as in most payment structures, anywhere from seventy to eighty percent of your payment goes to pay off just interest! That means your monthly payment is barely bringing down your principal.
If you are only paying 30% of your monthly principle, imagine how long it will take to knock down the amount you owe. Hmmm… maybe somewhere around thirty years? As long as your principal stays large, your interest payment will stay large, too. This cycle will prohibit you from paying off your loan quickly and in the end you will pay for your house several times over.
That’s why you need to be cognizant when hunting for a loan. Even if your house was not that expensive, mortgage brokers and lenders will try to find ways to raise the amount of money you borrow. They will try to convince you to include or “wrap” certain expenses into your home loan.
Although rolling payments into your mortgage may seem attractive in the short term by lowering your monthly, out of pocket expense, avoid it wherever you can. The price of adding unnecessary costs to your principle is not worth the short term gain. Remember, it will take years before the majority of your payment even gets to your principal loan.
When shopping for a mortgage lender, express these concerns openly. If your mortgage lender is willing to give you a great rate and promise to avoid wrapping unnecessary expenses into your loan, that’s the lender you should be working with. If not, shop around.
Your time is your money. Make the most of it.