Once upon a time, you had your fixed mortgage and your adjustable-rate mortgage. Now there’s fixed, variable, piggyback, 103 percent loan-to-value, portable ... so many options it’s overwhelming. Not to mention that most come with extra fees or costs.
Take the newly popular portable loan (like E-Trade’s Mortgage on the Move): The mortgage locks in today’s low rates, but can follow the borrower to a new house. The price? In exchange for portability, E-Trade adds 0.6 percent to the fixed interest rate.
And with some of these creative mortgages, it’s easy for borrowers to overextend themselves. With a home equity/mortgage combination loan, for instance, it’s possible to borrow 125 percent of the property’s value. Mortgage lenders call that “buried in your house.”
The solution? “You need to manage your mortgage like you manage your investments,” says Pickel III, president of the National Association of Mortgage Brokers. Get a good mortgage broker who can lay out all the options and fees. Ask them to put their fees in writing. Comparison shop — ask at least three companies for good faith estimates.
And remember, Pickel says, you’ll pay for what you get: “Anything that’s not your normal run-of-the-mill mortgage is probably going to have fees attached.”