Do You Know About Your Loan?

A: Gosh, I can't even remember the last time I did a mortgage do's or don'ts post here on the site. I realize that I have been discussing the fundamentals about the sub prime mess more than about tips to understanding what loan may be right for you. So, when I read this article on Yahoo Finance by bankrate.com's Elizabeth Razzi, I certainly was surprised. Most homeowners don't have a clue about their loan, when the rate expires, and what they might do when this occurs! Ahh, the American Dream!

"34 Percent of homeowners are clueless about their mortgage"

According to the article on Yahoo Finance:

In the survey conducted by Gfk Roper, homeowners with mortgages were asked what type of mortgage they had. A stunning 34 percent of the homeowners had no idea.

"That's a symptom of the complexity of the mortgage market today," says Ken Wade, chief executive officer of NeighborWorks America, a nonprofit organization that provides financing and training to neighborhood-based housing organizations.

Younger borrowers, and those with less experience as investors, can find the array of loan choices particularly confusing. Anthony LaGiglia, managing director of J.J. Burns & Co., a financial advisory firm in Melville, N.Y., says such borrowers have fewer benchmarks against which they can judge loan products. "They don't know what the market can be paying them in interest, and they don't know how much they should be paying on loans, either. That's a situation ripe for abuse by unscrupulous mortgage people."

Check out the pie chart showing this surveys results; its quite amazing:

OK, so 34% of homeowners in this survey just have no clue about the biggest loan they have taken out in their lifetime. I don't see any major problem with that, do you? So, what happens when the loan resets, if its an ARM? Well, lucky for us there was a question on the survey asking that as well.

Well that certainly doesn't help! Again, 34% of homeowners have no idea what they will do. Talk about thinking ahead!

The problem with this country is that too many people get involved with big investments without understanding all the aspects/costs/penalty's of their decision making. Hence the goal of urbandigs.com!

YOU MUST BE EDUCATED ABOUT YOUR INVESTMENT DECISIONS, ESPECIALLY ABOUT THE BIG ONES LIKE BUYING A HOME!

That means not only knowing product knowledge, finding value, what to pay for, and what you can afford, but also knowing what type of loan to take out and the characteristics of that loan!

For example, when I first bought my property on E 93rd street I did NOT take into account that my real estate taxes might increase as the housing market appreciates. Well it did! My real estate taxes went from $450/mth to $800/mth because the increase caused a shortage spread and I had to make up the shortage of payments from the previous year! After a year of making up those payments, my real estate taxes were $8100/annually or $675/mth. So, now I keep in mind that some things I think will not change just might.

Have you considered what might happen to your monthly costs if:

your building has a major renovation in need and maintenance assessment is put in place

if real estate appreciates and taxes are raised again in the years to come

if your loan resets at a higher rate and your payments shoot higher

Just be educated about all contingencies that might arise that will affect your monthly payments! Especially in your loans! If you don't know about your loan, what rate you have, or when it might reset, then call your lender today and find out some answers!

Here are some of my previous posts on Mortgage Do's & Dont's:

When an ARM is a Good Idea?

Interest Only Loans: Are They For Me?

Lay Off The ARM's

• Add to del.icio.us
• Digg this!
• Add to Technorati
• Add to Reddit