Is Your Mailbox Filled With Refinance Pitches?

October 29, 2007
My attention was captured this morning by an article on the front page of the LA Times. It was entitled "Refinance pitches in sub-prime tone". The article addresses the "blizzard of advertising" that mortgage companies continue to do in spite of the sub-prime meltdown. According to the article, those negative amortization and interest only and option arm loans are still being offered. The difference is that the target market is the homeowner with substantial equity, at least 3 years of ownership, and a credit score of 700 or better.
These come-on letters seem to me to be clearly in the "buyer beware" class.
There are some good questions to ask before being overly tempted.
What is the Annual Percentage Rate (APR)?
Is the initial rate a "teaser rate"?
What is the length of the loan?
Does it have a balloon Payment at the end?
What is your monthly payment for each month of the loan? Lenders have computer programs that can print out the entire principal and interest payment allocation.
Is there a prepayment penalty if the loan is paid off early?
Does the monthly payment quoted include taxes and insurance payments?

For more information click on www.ftc.gov/credit