Lifting the Lid On Mortgage Adverts
Mortgage Adverts have one purpose and one purpose only, to encourage you to take out their particular mortgage. Whether these advertisements are on the television, covering half a page of your newspaper, pop up on the internet or arrive in your email “in-box”, they are all there to tempt you, and whilst these very clever advertising people word them in such a way to make them sound like the deal of the century, they’re not always entirely true.
Mortgage Advertising Buzz Words
It’s important when reading these mortgage adverts that you understand exactly what they’re saying, or to put it another way, what they’re not. Let’s take a look at some of these buzz words and find out what they might not be letting on:
- Low Fixed Rate – for how long will this low rate be fixed? This low rate might be fixed for an introductory period of only 30 days and then climb sky high. You need to know exactly when and how the rate will change, and how it will affect your payments.
- Very Low Rates – okay, but are these low rates the payment rates or the interest rates? Very often this does not become clear until you’ve got right to the bottom of the fine print (the bit you need to use a magnifying glass for). Interest rates are used to calculate how much interest is added to your loan each month, and the payment rate translates as the amount of money you have to pay each month. If the payment rate is low, and the interest rate is higher then you could end up by not paying sufficient amounts each month to cover your loan, and the balance could actually increase over the loan period instead of being reduced.
- Low Payment Rates – this probably doesn’t tell you the whole story either. These low payments might actually mean that you’re only paying the interest on the loan, and nothing off the principal. Eventually the time will come when you have to pay off the amount you borrowed, sometimes in a balloon payment at the end of the term. This might even mean taking out another loan to pay off the existing loan when you thought you’d be all finished with your mortgage payments and own your home outright.
- Mortgage Rates at 30 Year Low – sound tempting? You betcha’, but hold on just a cotton picking minute and make sure that you know the whole story. Once again this is often for a limited amount of time only, and this introductory period might soon finish with the rates rising to a 30 year high.
- Offers in the Mail – you know the sort of thing “open immediately – important information enclosed about your mortgage” blah blah blah. Well, you might think that this is coming from your own mortgage lender but the fact is that different companies have access to your information from public records. Be careful of whom you are dealing with, it might not be who you thought you were dealing with – if you see what I mean.
What the Mortgage Adverts Don’t Say
The single most important bit of information you need from a mortgage lender is the APR, the Annual Percentage Rate and do they offer this information out? Search for it, it might be hidden in the fine print, it might be somewhere on their website but you’ll need to click onto a couple of links to find it . . . It ought to be there somewhere, make sure that you find it. If you know the APR of all mortgage deals you’re considering then you’ll be able to make a proper comparison about which is the best for you. This is the TOTAL cost of the yearly interest rate of the loan.
What You Need to Know
Basically, whatever buzz words these mortgage adverts do or don’t use, there are some details which you need to know in order to make an informed decision about which mortgage is right for you:
- How much you will need to repay each month. Will it change? When will it change? By how much will it change? Might it change more than once?
- Does your monthly payment include other things like homeowners insurance and property taxes, or will you have to fork these things out separately? If these are extras find out a rough estimate of what they might be so that you don’t end up with any nasty (and costly) surprises.
- How long is the loan term – 20 years, 30 years? How many payments does it involve, and at the end of the loan term will the job be sorted or will you be expected to make a balloon payment?
- If you pay off the loan early will you have to pay a penalty? How much would it be?
Don’t take everything you see on mortgage advertisements at face value . . . they don’t always tell the truth, the whole truth and nothing but the truth.