Free Investment Advice

You have undoubtedly received a mortgage application in the mail offering you 0% APR for a specific time.  While this offer may seem attractive, it is a gimmick the credit card companies and mortgage lenders utilize to entice people by offering an apple when, in fact, the real deal turns out to be a lemon.

According to the Federal Reserve, any initial information you receive about mortgages probably will come from advertisements, mail, phone, and door-to-door solicitations from builders, real estate brokers, mortgage brokers, and lenders.  Although this information can be helpful, keep in mind that these are marketing materials - the ads and mailings are designed to make the mortgage look as attractive as possible.

These advertisements may play up low initial interest rates and monthly payments, without emphasizing that those rates and payments could increase substantially later.  So get all the facts and make sure any offers you consider meet your financial needs.

Any ad for an ARM that shows an introductory interest rate should also show how long the rate is in effect and the annual percentage rate, or APR, on the loan.  If the APR is much higher than the initial rate, it is a sign that your payments may increase a lot after the introductory period, even if market interest rates stay the same.

An interesting article by Carolyn Noel Warren of Mortgage Helper tells about her experience attending a seminar hosted by one of the leading lenders in the U.S.  In discussing how they compete for customers who are seeking loans and refinancing, the speaker stated: “Give them apples and oranges to compare, so that won’t know which loan is best.”  These are the tactics lenders utilize to steer you towards their company for your financial needs.

If you are considering refinancing and happen to receive an offer where the APR is 0%, yet when it is time to sign the contract you find that the APR is not 0% but a much higher number you may want to reconsider.

The sub-prime mortgage crisis has made homeowners more aware of the problems associated with mortgages and refinancing when dealing with unscrupulous lenders.  If an offer sounds too good to be true, it usually is.

Research your lender thoroughly, ask questions, and don’t fall for 0% APR.