If you’re among the millions who got hit by the last housing bust, you probably know how bad it was. No one wants to experience what you went through. According to experts, one of the main reasons why the last housing bust was so severe is because of the fact that most homeowners weren’t responsible enough to know the terms of their mortgage loans.
If you’re thinking of taking out a mortgage loan, you don’t want to commit the same mistake. Below are some of the most important things you should know about mortgage loans:
Mortgage Cost is Complicated
Understanding the cost of your mortgage takes more than just knowing the interest rate percentage. To have a more accurate estimate of your loan’s cost, you need to investigate APR or annual percentage rate. APR is the financial concept lenders use to give borrowers a gauge of the loan’s total cost including origination fees, closing costs and other charges.
Mortgage Rates Change
Another mistake that millions of homeowners committed that led to the one of worse housing busts is the thinking that mortgage rate is fixed. Contrary to popular belief, mortgage rates actually change rapidly. These changes also depend on market movements just like how it affects stocks, mutual funds and bonds. Because rates change rapidly, don’t expect rates to stay the same throughout the duration of the loan.
Mortgage Differ in Rates and Fees
Also important to note is the fact that different lenders offer different rates and fees. When looking to apply for a mortgage loan, one of the things you should look at and compare are the interest rates and hidden fees. Because there are no regulations that govern lenders when it comes to charging interest rates, the responsibility to find out more depends on you. To make sure that you’re getting the best end of the deal, take time to compare your options thoroughly.
The Bottom Line
Like with any other loans, your job as borrower is to know what you’re getting into. Read the small print and review your loan terms to avoid life-altering financial consequences.