Read the fine print when you see an Amazing deal!!
Hello every one!
The below is a great article to read!
Read, understand and ask question prior to signing any Mortgage documents!!
What's the catch?!!
"I
came home from vacation this weekend to discover that last Friday one
of the big five banks announced (through the media..tricky tricky..) a
historic 5 year fixed rate of 2.99% (what the heck??) in an attempt to
shore up their dwindling market share. The rest of the lending industry
is working with an average 3.29% which was, and in fact still is the
lowest rate ever historically offered when comparing apples to apples.
The move to announce through the media made a huge splash and the media
bit. Every news outlet from here to Timbuktu had it as "breaking news"
and front page fodder. As you would expect this is creating allot of
fuss.
The question is, what's all the fuss about? The devil is
in the details. The two mortgage products are simply not the same. My
understanding is that this "deeply discounted" product is extremely
restrictive, available for a very short time, eliminates the borrower's
ability to get out of the mortgage for the full 5 years, forces a 25
year amortization, drastically reduces pre payment privileges,
eliminates double up or miss a payment options, all limiting increased
equity, allows refinance only with the incumbent lender and last but not
least, eliminates the borrower's bargaining power to negotiate at
refinance or renewal time. This is basically the stripped down economy
car of mortgage offerings with a catch... The car can only be serviced
at the dealer. And when it comes time to sell, it can only be sold back
to the dealer at a price they dictate. Am I saying this is all bad? Well
no, I guess. If one likes to drive the most basic of cars with hands
shackled to the wheel while hurtling toward a cliff with no way to avoid
the inevitable plunge...then I guess it's great.
I for one am
not advising borrowers to move to this type of loan for a mere 3 tenth
of 1%, regardless of lender. In my opinion, flexibility is power. The
power to manage debt is far greater than the power of a low rate with
heavy restrictions. Savvy borrowers work toward debt reduction actively
managing their mortgages by taking advantage of the perks and
flexibility offered through sound mortgage structure not restrictive
discounting. The bottom line is that actively managing a mortgage with
plentiful per payment opportunities and refinance calculated with
discounted rates rather than posted rates can drive the cost of
borrowing way down while also increasing the borrower's equity in the
property.
The bottom line is, when an already deeply
discounted item is put on sale.... check the code date cause it could
get smelly very quickly..
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