Interest Rate Claims Misleading

Interest Rate Claims Misleading

English: Mortgage debt (Photo credit: Wikipedia)

Interest Rate Claims Misleading

Reporting of interest rates in established financial publications consistently misleads its readers about a critical point.  Even the most respected publications make interest rate claims misleading.  Once one lender does it they all feel like they have to follow that lead.  Interest rates are nice and low.  That’s no reason to be careless about the way the figures actually work out.  Don’t wait until the closing to ask the hard questions.  No one is insulted when a consumer probes unless the lender has something to hide.

Deception Widespread

I recently read in a well known and respected publication that the Freddie Mac weekly market survey reports 30 year fixed mortgages at 4.15% and 15 year fixed at 3.36%.  It’s only if you keep reading that you will be informed that that figure includes the payment of 0.6 points for the 30 year rate and 0.6 points for the 15 year rate.  If the mortgage is for $300,000.00 that would be $1800.00 worth of points.  Don’t let them treat points as some kind of throwaway.  It’s real money.

Don’t let the “Points” Distract You

Points, as the term is referenced here, represent real money.  A point is pre-paid interest defined as 1% of the value of the mortgage.   Financial advisers recommend that you pay the points only if you plan to stay in the property for several years so you can earn it back.  The real interest rate is reflected in the APR.  Why not just take the points and apply them against the principal at the beginning?  Invite the mortgage lender to show you how that works out.

The bottom line?  Take away the points and the real interest rate for a 30 year mortgage is 4.31% and 3.51% for a 15 year fixed rate.

You’ve worked hard to get this far.  Protect yourself at all times.
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After practicing law for 37 years Edward F. St. Onge, Sr. now devotes all his time to helping consumers achieve a high credit score with amazing speed. Learn the counter-intuitive secrets to credit scoring through his down to earth instructions backed by extensive knowledge of the laws and trends. All of the latest tricks and techniques that they don't want you to know now at your disposal. At last a level playing field for the consumer!

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