Sellsius Open Mike is our way of sharing our blog. We lend our blog stage to those who may not have one and must speak their mind backstage in the comment section. Kevin Ward is a blogger. Still, he can have the mike. His expertise is in helping people pick the right loan. He has been in the real estate business for ten years. He’s from Northfield, MN. Visit his blog. Take it away Kevin.
You got the call, you know the one I’m talking about. The phone call during dinner about saving you hundreds of dollars per month just by refinancing your home. The one that promised to pay off all your credit cards, car payments, boat payments, back taxes owed, your 3rd cousin Henry for the money you borrowed in 1973, etc. That call. Did you go for it? Or maybe it got you thinking…”maybe I should call my broker, to see what he can do…”. However it happened, if you did, or considered doing, a home refinance to lower your monthly bills and payoff some consumer debt over the last couple of years, what then did you do with all that money you supposedly saved? Did you buy a boat? Another car? Did you pay off cousin Henry? Why am I asking you all these seemingly silly questions? I’m asking you because I’m hoping you will consider the ramifications. The reality is that all you really did is gamble. You gambled that the housing market would keep appreciating and off-set the closing costs and debt you rolled into your mortgage. You, if you’re like most people during this period, gambled by choosing an ARM or worse yet an Option ARM product over a fixed rate product. Instead of taking full advantage of historically low fixed rate pricing. You gambled that, by paying off your debt, your financial picture would stabilize enough that you wouldn’t have to jack up your consumer debt again. Where am I going with this?
If you did refinance and pay off your debt, effectively extending the term in which you will be paying on that debt, then I hope you will consider the following…you can actually make that mortgage scam work for you. Here’s how: If you effectively lowered your monthly bills by $300.00 per month as an example, you could take at least one half of that savings and now reapply it back to your mortgage each month as principle payment. What would that do for you? Well, let’s say your loan amount is $250,000.00 at 6.5% interest. Your current P&I payment is probably $1,896.00. By applying $150.00/month back against the principal of your mortgage you would pay off your 30 year mortgage in about 23 years. That’s $94,000.00 in interest you’d be saving! If you applied your entire $300/month in savings you’d pay your mortage off in less than 20 years! That would save you almost $140,000.00 in interest!!! Now do you see where I’m going with this? It’s about taking control. It’s about turning a bad idea into a good idea. It’s about being a part of the solution, not the problem. Please be really careful not to fall into the trap of new consumer debt after refinancing your old debt, all that will do is multiply your total debt load!
Kevin Ward
President/CEO
Truth in Lending Services, LLC
Email: kward@truthinlendingservices.com
Web: www.truthinlendingservicescom
Blog: http://www.truthinlendingservices.com/blog
I think a large part of the problem is the high profit margins involved in the mortgage and real estate industries. This is always going to attract some unscrupulous operators. This has probably been reflected most strongly in the sub-prime sector of the market in th last couple of years.
Better consumer legislation and protection is a help but ultimately I think that consumer education is the best weapon. If the consumer better understands what they may be getting involved in then they will have a far better chance of avoiding problems. I run a mortgage information site and I always try to explain the potential pitfalls as I feel that is the best way to help people avoid some of the disasters that could await them.