Before we get into today’s topic, we wanted to say something: we’re not against mortgages. Not at all. We think that owning your home is something that’s pretty important. We think that it can be a lot better to build an asset that you’re going to own for a long time rather than constantly giving your money to landlords over the years. Renting your home doesn’t build your wealth, but owning a home does. There, we got that out of the way.
There are some sneaky charges that come up during a mortgage, and it’s important that you at least know what they are. You have to make sure that you’re thinking through all of these things, because it’s quite possible to find that you’re only looking at your interest rate. While it’s true that the interest rate matters, the fees matter as well.
Did you know that there’s set-up charges for your mortgage? You probably figured that was part of it. However, there’s fees during the middle of your mortgage too.
What you’ll learn fast about the mortgage lending industry is that anything you ask them to do, they’re going to demand a fee for.
For example, if you need to make any change to your mortgage, there will be an administration fee. This is true even if you just want to add your spouse’s name to the mortgage. Want to turn your mortgage to a repayment loan? There’s going to be a charge for that too. Ouch!
If you’re a little late on your mortgage payment…surprise! There’s going to be a penalty for that. You might imagine that there’s no problem here, except that you’ll find that there’s now a surprise charge for every time they had to call you or write to you. Even if you agreed to set up a payment arrangement of some kind to get the payment in there, they’re still tacking on extra charges. They figure that if you’re late on your payment, that’s your problem.
What if you want to get out of the mortgage because you’ve found a better mortgage, or you got lucky enough to win the lotto? Well, there’s going to be an early redemption charge to get away from them. They figure that you owe them because they’ve taken the time to deal with you. As arrogant as that sounds, this is a pretty big industry-wide practice. It’ll be harder to find lenders that don’t resort to these tactics than ones who do. The best thing that you can do is make sure that you walk into the mortgage game with your eyes wide open.
The more planning that you put into getting your mortgage and knowing the terms, the more likely it is that you’ll be able to hang onto your mortgage and even get better terms down the road. Good luck!