How many of you have seen those commericals for new pills that will help you lose weight? What about the new ab machines shown on TV, showing how you can cut inches off of your waist and lose 20lbs or more. But every person on TV looks in great shape to beging with. And the before and after pictures tend to be a joke. The before pictures, these people look dumpy with ugly clothing and their hair is messed up. In the after pictures, not only do their bodies look better, with weight loss, but the clothes that they are wearing make them appear to be better dressed. Not only that, but their hair looks proper and they actual have a smile on their face, as opposed to the before picture to where they didn't have a smile on their face. Did you ever read the small print that says that you need to diet and excerise for any of this to happen? Where am I going with all of this? Please read below....
There are a many advertisements out there that the average consumer needs to be aware of. They are found on TV, in magazines, sometimes coming in mailers to your home, in blogs, and even here on Active Rain. I respect people's opinions, but when it's easy to disprove opinion with facts, how can one argue with you then? If the numbers are done accurately, there should be no misunderstanding then, right? How about those that tell you that your monthly spending habits won't change, but that they can save you thousands of dollars. Or cut up to 20 years off of your mortgage. I don't care if they have flashy programs that say otherwise. Let's use common sense. Let's go back to the old theory that you need to spend money to make money.
So, what kind of programs or advertising am I talking about? That you should be made aware of?
- Let's start with a basic one. The "No Closing Cost" loan or the "no fee" loan. Some companies advertise this under different names. But again, common sense. How would a company make any money if they didn't charge you anything? Keep in mind, we all get the same money from the same place. All the lender is doing is raising your interest rate by about 3/8 to 1/2 percent to cover all costs.
- Then there are the Mortgage Accelerator Programs. These programs come under so many names and disguises. Such programs as MMA by UFirst Financial, the Mortgage Magic System by Real Simple Real Estate, or the mortgage accelerator program from CMG, which is a first lien heloc, and the Australian Mortgage. Overall, they all have the same function, even though some of them state that they are better than the next. Keep this in mind, they are programs to show you how to pay down your principal quicker. I'll talk about this more in a minute.
- What about sales people selling you the bi-weekly mortgage plans, even after you settle on your mortgage. It's the same thing, just on a smaller scale. There is a set up charge. Please read below for the answer.
Here is a comment from a blogger just recently. "I can speak for the several products that I am familiar with, including my favorite, UFirst Financial, they are not dangerous."
That comment alone is a dangerous comment in itself and in my opinion, a typical sales comment and approach to try to make you feel comfortable. These programs can be dangerous and I will point out the reasons why.
Here is a comment from someone about the Mortgage Magic System. "The system is a technique that uses the homeowner's regular income to reduce their mortgage. The system cuts hundreds of thousands of dollars off the cost of a home. Real estate professionals need to know about it."
All of these programs, one way or another, try to sell you the idea that you don't alter your spending habits. Some will say that you don't have to add more to your mortgage payment, to reduce your principal of your mortgage. They tell you that you need to get a HELOC loan in order accomplish this. That you basically need to keep most of your pay check deposited into the heloc account or into a separate account. And then you take that money from your other account and deposit it into the heloc account. You use this money to pay down your credit cards and take the extra money to be applied to your mortgage, but from this account.
Few interesting points with this.
- But wait, I need to keep most of my pay check in another account to make all of this work? YES !!!!! Some of the people selling this tell you that you can spend some of your money and that it won't affect the whole scenario. But there are a lot of "what if's" involved. They won't use the term 100%, that they are 100% sure of this. Gee, I wonder why they don't use this term.
- Keep in mind, you need a heloc loan. Many negatives with heloc loans. Not only are the rates higher and that the rates can change monthly. But that the bank can freeze your heloc at anytime, without warning. Ouch... but they don't bring this up unless you ask or someone as myself that tells you about it.
Overall, do these programs work? Yes. Can you do them on your own, without paying start up fees from $350 to $3,500? YES. It all comes down to making extra payments yourself. The programs mentioned above, in my opinion, are just smoke and mirrors. They tell you that it's much better than paying down the principal yourself. But you know what, I have run the numbers on them all.
They also tell you that banks have a secret that they don't want you to know and they are going to reveal it to you, to show you how to avoid paying tons of interest. Again, sales chit chat. Many of these people that sell these programs have also been brain washed. Yes, these programs can woo you. They woo'd me until I took a closer look and as I stated, ran the numbers as axamples on each one. Yes, I have used the programs. The bottom line, that any of these programs take discipline. You need to be disciplined to keep your pay checks in these accounts. They use examples of keeping a thousand dollars of your pay check per month in these accounts. How many of you even have this much money left over per month? Besides, if you putt this same amount extra into your principal per month, you would get the same results. And sometimes a better result, because you aren't paying extra for a program. You are doing it by yourself. And one more note to end on.... these types of programs would only work for about 15% of the people out there to begin with. Why? You need credit scores above 680 (in most cases) and you need at least 20% equity in your property for the heloc. And think about this, most people that don't have many credit cards and are disciplined, don't need a product like this. The people that usually need help are those that live pay check to pay check, don't have much equity, or don't have the discipline. Hence this is where it can be very dangerous. Because if you don't follow the program, you will be worse off. Just like so many that did those pay option arms. All of this goes back to my original opening paragraph. You can think about losing weight all you want, with the help of diet pills and certain types of machines. But it takes discipline. You can do the same without the fancy products or false hope.
____________________________________________________________________________________
For more information on FHA loans, please go to this link. The FHA Expert
For more information on how you can obtain your dream home, please click here : Mortgage Financing Options
For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!!
Copyright © 2008 by Jeff Belonger
;)
Links;)
Tags (Tag Cloud);)
Archives
You speak the truth. I am under the belief that it is not necesarily the mortgage products that are bad or do not accomplish what they say they will for the right scenario or right person...the issue is way to often it is the person who is wrong for the product. Discipline is key, not only for each of these loans, but also when shopping for a loan. I have seen the dreaded neg am work for many people, I have seen people who have executed accelerators through, and each has a unique situation that is not just biting on a hook that can provide an unrealistic dream!