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Don’t
fall victim to mortgage cons |
|
Whenever someone applies for
a mortgage
loan or any loan in fact, the main priority
concerning the loan is to pay it off as quickly
as possible. Counterthink.org’s article,
“Home loan tips to avoid being conned by home
mortgage companies,” by columnist Mike Adams,
explains that even when you think you are taking
the necessary steps to quickly pay off your loan,
your mortgage
company may be conning you.
No matter how you think of it, loans are designed
to take as much money as possible from the consumer
without them exactly knowing it. “In other
words, if you get a 30-year loan, you can make three
or four years of payments and end up only having
a few hundred dollars worth of equity in your house.
That's the way the loans are designed. They are
designed to extract as much money from your pocket
as possible over the life of the loan.”
The best way to minimize the amount of money mortgage
companies take from you is by paying more monthly
than is due. For example, if you owe $1,000 per
month on a loan, it is safe to assume, especially
in the beginning, that about $900 is going towards
interest and the other $100 goes towards the actual
principle.
So you decide to pay $1,500 per month instead of
the minimum $1,000. Now, you assume that $900 is
going to interest and the other $600 with be used
foe the principle. This will save you a lot of money
in interest in the long run, especially if you pay
$2,000 per month or more, right?
“That
would be too unprofitable for the mortgage companies.
They have to devise a system -- a con -- to extract
more money from you even though you're trying to
pay down the balance. So here's what they do. They
will take that extra $500 you've paid, and instead
of applying that to your principle, they apply it
as a pre-payment of your next month's interest.”
Going back to the example of paying $1,500 per month,
you would expect $600 per month to be applied to
your principle. But it is still only $100 going
towards your principle and $500 will be applied
to your next month’s payment of $1,000. If
you pay more the next month, then the extra money
will be applied towards the next month after that,
and so on. Mortgage companies can get away with
this because many borrowers do not take the time
to do the math.
“So what can you
do to defend yourself against this unscrupulous
tactic used by some of the largest banks in the
world? Well, it's simple. Keep track of your principle
each and every month. If you send in an extra payment,
you should know how much extra principle should
be paid down. You may have to call
your mortgage company and demand that the extra
payment be applied to principle only. Then, next
month, when you get your statement, make sure that
they have applied it appropriately.”
If the company keeps giving you the run around or
is “messing” with your money, Adams
urges you to refinance with a different bank. Adams
also stresses the importance of not trusting big
banks just because they are widely known and have
multi-million dollar advertisements. You should
always be aware of what your money is being used
for.
“Let's face it, a lot of the
banking practices out there are simply dishonest.
But on the other hand, banking does have an important
role to play in society. Without banks, we wouldn't
be able to leverage the use of capital in the way
that has spurred the prosperity we now experience
in our relatively free market economy.” |
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