Mortgage Broker or Assassin?

Mortgage Broker or Assassin?
Sometimes a mortgage broker can offer to lend you a quarter more than the house you want to buy actually costs. In other words if your house is valued at $100,000 he will actually lend you $125,000. This may seem a good deal to you since it can help you to deal with your credit card debt, for example, or just to put some cash in your pocket, but this is actually a Death Loan. Only the most unscrupulous and money-hungry lenders will offer you such a deal.

This loan actually kills people financially. When you borrow more than your house is worth you will probably come to fail sooner or later. It is true that you can cover some of your current expenses with that extra cash that you’ll get, but your monthly payments are going to be astronomical afterwards. The interest rates on these loans are usually between 11% and 14%.

Even if you have paid off some 10 or 20 thousand dollars of your original debt and feel great don’t start to celebrate. What happens next in most is a person who took this type of loan starts to run up their credit. Very few people have the discipline to keep those balances low, above that many people take this type of loan to deal with their credit dept. Here is where a financial trap occurs.

What happens next is the person ends up with his original debt, huge monthly payments and a house that is worth 25% less than his loan is. This means that there are no possibilities for him to sell the house, refinance his mortgage and to pay his monthly bills; this is a confident way to bankruptcy.

Avoid this type of deal by all means; above that, if your mortgage broker offers you one consider looking for a new one, as soon as possible.

© 2010, Jericho Mortgage — Mortgage Broker or Assassin?