Telltale Warning Signs if You Refinance a Home Mortgage

By Jonathan Haeber
CMR Columnist

The other day my message machine at home was blinking. Normally people call my cell phone. Telemarketers call my home phone. In fact, my home phone is there explicitly for telemarketers to hear a scathing greeting message on the fourth ring.

The message left was interesting, and intriguing. Apparently, this guy named Chris knew my situation. He knew that I was set up for a 250,000 dollar ARM home mortgage, and that I would potentially be thinking about a refinance of my home mortgage. For those of you who know what ARM means, you also know that the rates on my mortgage could adjust dramatically because of rising federal rates.

He offered me a refinance rate 2% below market rate. I was surprised. How can someone offer such a low-priced loan! Surely, this is a scam. And I was right. I listened to the message again, and I heard the word "introductory."

Beware of Introductory Rates

The word "introductory" is one of many telltale warning words that you should listen for before choosing to refinance your home mortgage. Sadly, America is plagued more than ever by businessmen who faithfully follow P.T. Barnum's famous advice -- "there's a sucker born every minute." All these people want is to take advantage of you and legally loan shark you into debt. Debt consolidation, refinancing, and the home equity loan market are rife with these types of people.

Below are some words you should be wary of. Write these words down. Post them next to your phone or on your desk at work, or anywhere for that matter. If you hear these words, run away and never turn back. Look for someone else to refinance your home mortgage:
  • Prepayment Penalty
  • Mandatory Arbitration
  • Second Loan
  • Credit Insurance
  • Negative Amortization
  • High Loan-to-Value (LTV) Ratio
Source
City of Oakland: Predatory Lending

About the Author
Jonathan Haeber is a marketing writer for Discovery Channel Stores. He recently purchased his first home, and took a self-taught crash course in home mortgages.

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