What Home Loan Lenders Do to Attract
Your Business
You have finally made the decision to seek a home finance. Whether
it be to buy your first home, a new home, a cottage, complete a
renovation project or renew your existing mortgage at a more
convenient rate, the sea of home finance offers will be
overwhelming. Lenders will try many strategies to garner your
business and you will need to research and study fully in order to
choose the best home loan solution for your needs.
Admittedly, it will in fact be very difficult to choose between home
finance offers, as they are not equal. It will be like comparing
apples to oranges and many promotions are basically draws to entice
people. So let’s list some of the promotions advertised by home
finance lenders to attract new business.
1. Low Interest Rates
The home finance lender may offer rates that seem particularly low.
At a glance, you may be tempted to jump on board thinking that you
have found a gold mine in savings. In reality, it is important to
read the fine print of the home finance offer and understand the
promotion thoroughly. In some instances, the low interest is only
offered for a short period of time. It is typically an introductory
rate and may not be in effect for the duration of the home loan.
Also, you will need to speak to the home finance specialist about
your specific circumstances. There may be restrictions on who may
apply for the low interest home loan. Some of these restrictions may
include:
• Bankruptcy
• Poor payment history
• No savings account at the particular establishment offering the
low rate
• Certain amount being financed
• You already have a mortgage so you do not qualify
• If offered by a broker, no investor to finance your home loan
2. Good or Bad Credit
More and more today, you will find that advertisements for home
loans cater to a particular niche – either good or bad credit.
Nowadays, the bankrupted person can apply for a home loan easier
than many years ago. This in itself is a business for certain types
of mortgage brokers and home finance specialists.
In many cases, when credit is poorer, the rates are always higher.
So if you have good credit, you may not want to review these types
of offers. You may do better by contacting your bank for your home
loan.
For those persons who have had a poor credit rating and want to
rebuild, this may be the way to do it. Usually if you have paid
faithfully on a home loan for a couple of years, you can start to
increase your credit standing.
But again, these home loan offers require scrutiny before signing.
You may be restricted in what you can and cannot do. Some private
home loan lenders do not permit large sums to be applied during the
term of the home loan. Others charge large penalties for paying out
the home finance early. Know the specifics of the home loan because
in the beginning, it may seem rosy but at the back end, it may prove
to be troublesome or detrimental for you.
3. Allow Lump Sum Payments
It seems to be very popular to advertise that lump sum payments are
permitted during the course of the home finance. Basically, this is
a situation where you find you have a little extra money and you
decide to put it against your home loan. Many people believe,
however, that when you apply large sums of available funds to the
home loan, the payments will be reduced. This is not the case unless
you actually rewrite the home finance.
In addition, some home household finance lenders restrict how much
you can apply and when. You may only be allowed to do it once in the
duration of the home loan, or you may only be allowed to apply extra
funds once a year, or you may only be permitted to apply a certain
percentage and not everything that you wished to apply.
Since many home finance lenders are quite different, read the fine
print or ask specific questions up front before committing to a home
loan.
4. Adding to an Existing Mortgage to Make Payments Smaller
Many people are cash crunched these days and are looking for ways to
reduce their payments and have more available cash at their
disposable. It is common for many people to continually consolidate
debt thereby reducing their monthly obligations.
Home finance lenders thrive on people’s quirks and habits. They may
offer to refinance an existing home loan adding the renovation costs
for example in order to keep the payments smaller than having to
take out a home loan and another type of home finance. Remember that
every time, you decrease your payments without actually paying
anything down, you are increasing the length of the home loan and
the interest expense.
5. Gifts, Incentives, Prizes
This is one household finance promotion of which you really need to
take particular notice. You see many home finance lenders offering
big screen TVs, stereo sets, computers and the like. Do you really
think it is wise to base your home loan decision on who is giving
the better gift or prize? Do not be caught up in the drama and
excitement of getting something for free. Your home loan decision is
a lifetime decision and nothing if free.
The crux of the issue is the household finance itself NOT the prize
for signing. If the gift is a thank you from the bank where you
already deal and you were getting the home loan there anyway, then
great, you maybe received a bonus. But always base your decision on
the specifics of the home loan itself.
6. Lender May Pay Down Payment
Some home finance institutes have taken a new twist on things.
Recently, there have been many advertisements where the home loan
specialist will offer to pay a five percent down payment on your
behalf for the house being purchased.
Again, it is vital for you to understand that this is not free
money. How does it impact your actual home loan? When do you repay
the down payment and at what cost?
7. Incentives to Transfer
You may not even have been searching for a home loan but you come
across an ad that seems great. You are ready to jump at the chance
for something better in a home loan. You think that the home finance
lender is offering all kinds of benefits to transfer your home loan
from your present company to their company.
This is one situation in which you need to be very careful. Are
these long-term benefits? Are you really saving money on the home
loan? More importantly, how much it is going to cost to “get out of”
your existing home loan agreement?
Review the numbers before changing home finance specialists. You may
not be saving one cent in the long run but on the contrary, spending
a lot more. The expression “jumped from the pan to the fire” really
fits here. Your home loan is a serious obligation and you need to be
informed before making rash decisions.
8. Fixed Rate vs. Variable Rate
Depending on the home finance institute’s priorities and what they
are promoted on a particular advertisement, they will make it look
like one way is better than the other. Again, both rates may have
merit but you need to review the numbers yourself and decide which
home loan is best for you.
In summary, none of these household finance promotions,
advertisements, gimmicks and offers are necessarily “bad”. There
must be at least one that will suit an individual’s particular home
loan needs. The key, however, is to isolate the home finance offer
that does the most for you. Do not lose sight of the fact that the
home loan institute creates the home finance offer for their own
benefit.
Take the time to read all the documentation, ask questions of a real
home finance expert who can explain the requirements and specific
details of the home loan offer and lastly, narrow your search down
to two or three household finance institutes with whom you feel you
can do business.
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First Time Buyers ??? |
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| How Much Can You Afford? |
| The Anatomy of a Mortgage |
| The Two Basic Types of Mortgages |
| Additional Types of Mortgages |
| The Lender: Bank or Mortgage Broker? |
| Loans for Sale |
| Shopping for a Loan |
| Finding your loan online |
| Consider a Mortgage Pre-Approval |
| Six Strategies for Saving Money on Your Mortgage |
| The Down Payment |
| Special Loans for Everyone |
| The Tax Implications of Buying Your Home |
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