How Well Do You Know Your Mortgage?

I was at my massage therapist¬†yesterday (I was in an auto accident last July) and she was “talking mortgage” with me because she thought I find the conversation relaxing. ūüôā¬†¬†She recently was in the process of going through a refinance (with someone else, aahhhh‚Ķeven more soothing) and discovered she has a prepayment penalty of $7,000 on her current mortgage.¬†¬† She called off the refinance even though it could save her a couple hundred dollars a month (she may not keep her current residence for long, so this may not be a good move for her‚ĶI do not have all of her financial details, so I cannot provide a professional opinion).

Apparently her original lender¬†never disclosed her prepayment penalty; at least she does not recall such a discussion.¬†¬†¬† She was very surprised¬†with how¬†little she¬†knows about¬†her largest debt.¬†¬† She’s not alone.

I’m challenging RCG readers to make sure you understand your current mortgage.   I double dog dare you to dig up your Note (this should be with the inch thick stack of papers you received at your signing appointment) and confirm:

  1. What is your interest rate?  
  2. How is the mortgage amortized?
  3. Is there a prepayment penalty?   

Is your mortgage an Adjustable Rate Mortgage?   I have some additional questions…just for you:

  1. What is the date that your mortgage scheduled to have the first rate adjustment?
  2. How will your new rate be determined?  (What is the margin and index).
  3. How much can your mortgage adjust when the fixed payment period is over?
  4. How often can your mortgage adjust when your fixed period is over?
  5. Do you have deferred interest or negative amortization?

In light of all the press mortgages are getting these days, this is a good excuse to brush up on yours.   Just like my Massage Therapist, your Loan Originator may not have fully explained the details, or maybe you were so caught up in purchasing or financing your home, all those numbers slipped by.  It happens.

It’s up to you to make sure you are massaging your financial future to work in your best interest.   You can always contact your previous Loan Originator and have them explain your mortgage in fine detail or find another Mortgage Professional to help you.