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:: Home and Mortgage Financing :: |
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On the outset, a home loan or mortgage financing is a phenomenal way to get things done in and around your home in order to not only boost its value, but, for some a quick way to get the renovations completed without spending years saving up your own money. But, as always, "buyer beware" is a prudent friend of yours as there are unscrupulous lenders that cause more problem then they are worth. These types of lenders are aptly named "predatory home mortgage lenders" as they circle the waters like sharks looking for their next innocent victim.
There are many steps that you can take to ensure that you don't get stung in any loan or mortgage financing scheme that may seem too good to be true. The object of this exercise is to make you a smarter and far more successful in being a smart borrower. It is also important to not take too much heed with what you see on television or offers you receive in the mail, as they simply don't tell the entire story.
The first step in understanding how to be a smart borrower is in knowing exactly what your credit rating and credit score are. You always need to be aware of what your score is as important to those who actually do have good credit scores as those who don't. Those individuals who may have a good credit score may not even be aware of their rating and in not knowing may end up paying higher interest rates on loans. If you are always aware of your credit score and have good credit, you can use this as a bartering tool in negotiating the best loan possible and ensuring that you are not paying the high interest rates. There are two ways to obtain your credit score: the Internet, which is fee based, or, through a lender when you actually apply for the loan. If a lender won't give you your score, it would be best to steer clear of them. The higher your score, the better your credit is and those whose scores are over 700 are considered a good to excellent rating.
The second item you need to be aware of is to be cautious when thinking about using a home loan for consolidating credit card debts as that your home is at risk should you default on the loan. Remember, a credit card lender itself cannot foreclose on your home if you don't pay your credit card loans, but, a home equity lender can foreclose your home if you don't make mortgage payments.
Do not be afraid to shop around with different lenders or brokers and you want to ensure you get the best loan possible. Things you should consider when shopping around include:
- Know if you would want to look at a line of credit or a loan
- Talk to several different lenders by starting with banks, savings and loans, credit unions and mortgage companies; not those who send you mail, call you or knock on your door
- Understand what the role of a broker actually is if you decide to use one. Brokers often charge you to find a lender and don't actually lend the money to you themselves. As well, some lenders may end up paying a broker to find a borrower and then pass on those fees to you through high interest rates.
- Ask all the lenders you visit to explain all the details of the loan to you and what the payment schedule is.
- Look at all the fees that will be applied during the life of the loan and what may look like the best loan with the lowest monthly payment may not actually be that, but, a loan with hidden fees.
- Look to talk to a housing counsellor to discuss all your option available.
There is also the option of a reverse mortgage for those individuals who are 62 years of age and older, as this is a far better option than a home equity loan. The idea behind this type of mortgage is that these loans are not repayable for as long as you live in your home. You can either obtain a lump sum amount, go for a monthly income, get a line of credit or a combination payment option.
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