Buying a home can be a tricky task, particularly for first-time buyers. A typical mortgage agreement can be a minefield of potentially problematic clauses. Before you draft a document and sign on the dotted line, here are five mortgage mistakes to avoid.
Pre-Payment Penalty
Thirty years is a long time to carry around a mortgage, so many homeowners will make extra payments when they have a little extra cash in order to speed up the process. But lenders make their money off the interest you pay, so the longer the mortgage, the more they stand to gain. As a result, an increasing number of mortgages come with early payment penalties — the lender will charge you extra if you make a lump-sum payment ahead of schedule. While you might think you’ll never have the cash to make a large lump-sum payment, there are still good reasons to avoid one of these types of loans. If you ever sell your home or refinance, you’ll effectively be paying off the loan early, and you’ll likely get dinged with high fees. To maximize your flexibility when paying off your mortgage, make sure you loan agreement is free and clear of these sorts of penalties.
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