Mortgage Applicants: Consider All the Costs

If you’re mortgage refinancing or in the market for a new home purchase loan, you’re going to want to pay close attention to all the costs.
It’s imperative you don’t just focus on the initial interest rate or the terms that a mortgage broker or lender might quote you off the cuff.

What are the actual fees?

Is this an adjustable-rate mortgage product that could lead to much higher home loan payments in a few years? And what is the cost, if there is any, of your paying it off early?

Kathy Ann Williams, housing coordinator for Oakland County’s Community and Home Improvement Division in Michigan, tells homeowners to pay attention to the APR, which measures the true cost of their Michigan mortgage.

She was counseling one homeowner who had three mortgage rates quoted to them by lenders. The quoted rates ranged from 6-6.25 percent. Fairly similar.

But when you looked closely at the paperwork, one mortgage had an APR of 6.32 percent and the second mortgage was actually offered at 6.8 percent.

The third mortgage had an APR of a staggering 11.3 percent.

When you’re in the market for a home loan, you can’t afford to make this kind of mistake and end up with a loan you can’t fully grasp - or pay.

Another cost: Possible mortgage prepayments.

Many borrowers don’t know that you might be charged a fee if you prepay a mortgage. Some counselors have spotted prepayment penalties that are 3.75 percent of mortgage loans in the first few years of the deal.

That would amount to about $3,750 if you prepaid $100,000 on your home loan in the first few years. It’s your money, and your home. Be smart.

Don’t get in over your head because you didn’t do your homework.

SOURCE: Detroit Free Press