Mortgages are a complex business, and taking some wrong steps can spell disaster for your finances. Make sure you do your best to avoid these common mortgage dangers!
A lot of people sign up for a mortgage expecting to be in debt for a particular amount of time. But circumstances may change. Perhaps they find themselves in a position where they need to try getting the mortgage paid off a bit sooner than they previously thought. Or perhaps their circumstances forced them to be in debt longer than they originally signed up for. This can be the result of incorrect estimates, but quite often it’s the result of financial disruption. You do actually have options if you want to deal with your mortgage a little quicker. You can shorten the length of your mortgage (or, if need be, lengthen it) to make things work a little smoother for you. This is known as mortgage refinancing. You can get more information about this, and other mortgage issues, at http://houseloan.com.
A loan suspension can occur if you’re not working with accurate lenders, or if you’re not accurate or truthful during the consultation process. A loan is suspended if the lenders deem the mortgage to be faulty. This means that they’ve found an issue with it that doesn’t gel with the information they used to clear the mortgage in the first place. Let’s say, for example, that a mortgage company has given you a mortgage with terms based on the fact that you earn $50,000 a year. However, if you actually earn substantially less a year and the lenders find out, then the loan may be suspended pending further investigation.
Risky mortgage types
There are particular types of mortgage out there that you might be best advised to avoid. Of course, some of them would work pretty well for people in very particular situations, but the average person looking to acquire a new home should probably stay away from them. Let’s take interest-only mortgages, for example. As the name suggests, this is a type of mortgage where you don’t pay back the capital every month – you only pay the interest that is calculated from that capital. You’ll have to pay back the capital at the end of the term, though – and the overall costs are going to be very high. Read more about risky loans over at http://www.investopedia.com/risky-mortgage-loans.
You should be sure to thoroughly research every lender you find and consider working with. When people think about untrustworthy lenders, they usually think about predatory lenders or straight-up scam artists. These guys may set monthly payments so high that you can’t keep up, forcing you to pay high fees, thus increasing their profit. But you also need to consider the customer feedback of lenders who aren’t necessarily predatory. The company may not be very good at responding to inquiries, or may have rude customer service. These may create big problems in the future.
Finally, are you aware of reverse mortgages? The value of your home, known as the home’s equity, can be converted into money that can be spent however you want to spend it using a reverse mortgage. What is a reverse mortgage and how does it differ from other loan types? If you are a retiree on a fixed income but you own your home, you can use a reverse loan to pad that income a bit, either by requesting monthly checks or a lump sum from your lender. For as long as you continue to own and live in your home, your mortgage balance will not be due, but you can choose to pay it back whenever you like. If you ever leave the home then you will have to pay back the loan balance within a short period of time or the proceeds from the sale of the home can be used to pay the remaining loan balance.