One would hope that lenders will have the borrowers’ best interest at heart. After all, the borrowers are already paying such high-interest fees. What more should lenders want, right? But lenders are in this business because they are in for the kill. They understand how money works and how to make more from unsuspecting borrowers who don’t read the fine print of what they are signing.
As a borrower, you have certain inalienable rights. You have the right to shop for the best mortgage rates. You have the right to know how much the mortgage broker is making in fees. And, you can ask for an estimate of the loan charges. When borrowing from a bank or any lender, stick to these rights. They will help you not only to get the best loan but also to avoid mortgage scammers.
Using False Appraisals
One of the things that lenders do is to use a false appraisal to sell a property higher than its actual value. They will show you documents proving the high appraisal of the property. The price of the property is the most important factor in buying a home. If you can, ask for the appraisal yourself from the local land registry. You should get the latest appraisal of the property. This document will be the basis of how much you should offer for the home.
Providing False Income Information
Some mortgage brokers will encourage you to provide false income information. They will tell you that it’s going to make the loan approval easier. The lenders know about these techniques. They approve of these techniques knowing that the borrowers could be committing a crime. There is always a way for you to get approved for a mortgage. You don’t need to lie about your income because the Internal Revenue Services (IRS) could come after you. Lying on your income documents is the worst thing you can do.
Lending More Money
Lenders can also approve you for an amount of loan that you cannot afford. How do they know you cannot afford to pay it off? They have seen your credit history and income statements. They know that you are not making that much to pay the interest and capital of the loan. The trick is to make you want to pay lower monthly amortizations with higher interest rates. If you add up all the payments you have to may in 15 to 20 years, you could have bought another house with the rate.
It is up to you to determine how much you can afford to pay and for how long. Even if you want that $600,000 property, you shouldn’t commit to anything you cannot afford. Lenders and mortgage brokers will try to convince you otherwise, but you can end up in trouble if you bite more than you can chew.
Do you know what happens when you refinance a loan? You will end up with higher interest rates and a longer loan term. You’ll find yourself paying for the same property even into your retirement age. This is the worst advice you can get from a lender and mortgage broker. What you need is a way to pay off the loan quickly and not extend its life anymore. Every time you get into trouble with the payments, some lenders will try to convince you to take a second or third mortgage. You could be digging your own financial grave.
Pushing Balloon Loans
A lender and mortgage broker can attract you with low monthly amortization rates. The catch is you have to pay a lump sum amount at the end of the loan’s term, or every year or two years. The lender might convince you this is a great scheme because it will give you time to save for the lump sum amount. But that amount can be in the range of tens of thousands of dollars. How sure are you that you’ll save that amount every year or 10 years after the maturity of the loan? In the end, you will be forced to take another mortgage and extend the life of the loan.
Some borrowers feel that they shouldn’t complain too much because they are only borrowing money from a lender. You don’t owe the lender anything but the money you borrowed. It is not to your interest that they are letting you borrow money. They are making money off you. So, know your rights and understand how you can use the law to protect yourself from predatory lenders.