Due to high interest rates, I see more and more predatory lenders are showing up. The number of transactions is down about 40% overall, and refinancing is very rare these days. Where do you think the lenders are making up the difference compared to past years?
Watch out for: subprime lending, reverse mortgage, HELOC loan, variable rate buydown loans. If you are going to use any of the risky loan programs, make sure to understand what you are signing up with based on the worst case scenario.
The questions you should be asking:
- Subprime loans: How risky am I with my current debt to income ratio and with increasing living costs? Any instability in my job situation in the near future?
- Reverse mortgage: Are there better options that reverse mortgage, like cash-out refinancing, selling and downsizing?
- HELOC loan: What happens if I’m not able to pay additional HELOC loan payment? How does interest rate accrued, like mortgage or credit card?
- Variable rate buy down loan: Is it fixed or variable after initial low rate period? What happens if the rate goes higher when I have to refinance the loan?
Lastly, shop shop and shop around for your mortgage. A small rate difference can make a huge difference in the life time of the loan.