How many times do you check you restaurant bill? If not often, I would advise you to do it more, especially when dining on your overseas vacations. Still, much more Americans check their restaurants bill, than the number of homebuyers, who check the charges for their mortgages.
There are two popular misconceptions about the mortgage surcharges. First ? the charges are all the same because of the competition. Second ? there is nothing we can do about it, so why bother?
They are both wrong. The charges vary, sometimes within the same company depending on who their customer is. And yes, you can reduce those charges substantially just by asking about them.
There us an old story about a waiter, who presents unreasonably high bill at the end of a meal. His customer asks very politely to see the itemization of the charges. He goes over the items with the waiter one by one. Salad, yes, we had salad. Steak, yes, we had it. What is 'successful' for $95? I don't remember ordering it. Shrugging his shoulders the waiter crosses the item out from the bill: "Most of the time I am successful with that one, but sometimes I am not".
You will be surprised how often this old joke is played on the unsuspecting customers at the mortgage closings. You can say: "But I always check the charges myself. There was nothing like that on my list".
Yeah, you think they would be stupid enough to put the charges in the open where you can check them? No, the charges are buried in the computations of the interest and principal payments. Those computations formulas are among the most closely guarded secrets of the lenders.
The lenders even have a special abbreviation for such charges, P.O.C., which stands for Paid Outside of Closing. Those charges can be for anything, from a finder's fee to your broker (or whoever referred you to them) to different sorts of mortgage insurance, which you are required to pay for, but it benefits the lender.
They will fight you tooth and nail, if you ask them to disclose that. Their most common answer to you would be: "Oh, we don't know the details ourselves. Our computer does the computations. It is our company's private information."
The only way for you to know exactly what the lenders are charging you is to compute the monthly payments independently. They are trying to make this task as difficult as possible for you. They use complicated allocations, where they often change the amounts that go to the interest and to the principal. Why? Because they don't want you to know.
So you might be thinking that after a few years your monthly payments have reduced your mortgage principal, when in reality the principal changed little and all the money went to cover interest payments and a lot of other funny charges, about which you never have been told.
How can you get this information? It can be yours for the asking. Of course you can start getting answers like: "It is not in our computer. We need to order an additional report for that. I don't have this information."
You can continue to deal with this people, if you wish. Just know that they are lying. And if they are lying to you now, what will prevent them to do the same later, when you are at their mercy as their customer.
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