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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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