The Best Direct Mortgage Can Be a Costly Mistake [mortgagehelps.blogspot.com]
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If you are dealing with your bank or other lender there are some points that you should know in order to avoid costly mistakes. Not every bank or institution can offer you the best direct mortgage without consequences to your financial well-being.
As you look over the list of loan providers, from the large national institutions such as Wells Fargo or Bank of America to your local savings bank, a common thread connects them all. They seem to offer the same product with only slightly varying degrees of alterations. One lender may have offer a 5% - 30 year fixed mortgage with 2 points while another may offer 5-1/2% -30 year fixed with 1-1/2 points while a third may offer 6% with no points. Each offer cost the banks the same, but may cost you considerably more over the long run.
The cost of money is the key. Most lenders realize that only a small percentage of borrowers keep their mortgage for the full term.
50 years ago it was different, households didn't move as often as they do today. If the lender is offering to lower the interest rate by having you "buy it down" with points then you are in essence paying extra for the same loan should you choose to sell your home or refinance within a few years. If you keep it beyond that, say 10 years, 15 years or even the full term, then it would be worth your while to buy down as much as you can in order to save the interest.Lenders expect you to refinance within just a few years. And many people do. If you have a really low rate of interest that you got through a special government sponsored program then don't change the terms. Chances are you'll never see those low rates again. When you do refinance, the points that you paid are monies lost to you forever since you no longer have the loan and will pay additional points on the new loan.
So when dealing with your local bank or searching for the best direct mortgage, be on the look out for this and other costly mistakes that most borrowers aren't aware.
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