Mortgage Company

How the mortgage company turns a profit Although they seem to be handing out money by the hundreds of thousands - and they do - a mortgage company makes its millions - or billions - through a series of payments made by you, the home buyer, after they loan you the cash to purchase your home: Interest. Your mortgage rates - that percentage tied to any home mortgage - are the interest payments you are responsible for for as long as your mortgage payments continue, ending only at the completion of your term, in a prepayment settlement with your mortgage company, or in a foreclosure where you decide to stop paying and your lender decides to take your home. To get an idea of how much money these interest payments generate - a $210,000 loan (very close to the national loan average) paid off at a 30 year fixed rate of 8% will cost $1540.91 a month, for a total after 30 years of $554,727.60. That means for your $210,000 you will end up paying $344,727.60 in interest, or roughly 1.5 times your mortgage principal. Wow. Lender fees. Here we'll include points you pay to pay down your rate, insurance fees if necessary, and taxes. Sometimes, if your mortgage company is really hungry for your loan, they will waive these fees altogether and "settle" for your interest payments. Other times you will find a mortgage company incorporating these fees into the actual loan. Be sure you know just what you are paying for in your loan and up front. Closing costs. Again, these can be either incorporated into the loan or paid up from at the time of closing. Closing costs might be considered lender fees - again you are paying your lender more fees - but this is just to emphasize the many ways in which a mortgage company can charge you more money. At times it will seem like your lender is asking a lot and demanding more money than you think appropriate for your mortgage loans. For this reason alone you should force yourself to consider multiple lenders and mortgage opportunities, as well as convince yourself that you will pay a lot for your home, but you get a lot as well. Home ownership is a strong financial investment in most cases, and the money you pay in interest, fees, and closing costs is well worth it when you sell your home. The real money mongers the companies profiting the most off your loans are the ones offering a bad credit mortgage. These loans are no different from traditional loans - and a bad credit mortgage company is no different and sometimes the exact same as a mainstream lender - but the loans carry higher costs and rates because of the 'risk' you pose with a poor credit history. Lets say the above example of a 30 year fixed rate loan for $210,000 was adjusted for your less-than-perfect credit standing and you got a 12% rate instead. Watch out - you will pay $2,160.09 a month and in the end owe $777,632.40, or $222,904.80 more than with the 8% interest. bad credit mortgage companies ease that almost insane interest payment through financial techniques, but it is easy to see how a 'bad credit' can be a VERY costly investment indeed. The best thing you can do is fix your credit right away - keep up with your payments and flex your debt muscles elsewhere - and refinance with the lower rates reserved for the best candidates. Interest is the biggest cost of your home - don't pay more than you should and allow the rich to get richer. An American mortgage is your best bet!