Quick Hints and Insights


 Hints & Insights - Mortgage Ads on Television



You're sitting in front of the television and a familiar mortgage advertisement pops on.  "You can get a mortgage for $995!"


Of course you can.  Through any mortgage lender in the United States.


The ad is truthful, and as required, includes the federally mandated Annual Percentage Rate information.  What it doesn't say is that your mortgage interest rate will be about quarter percent higher than that of a borrower willing to pay a one-point loan origination fee.


It lets you assume that you are getting a "deal."


You aren't getting something for nothing.


That isn't a bad thing.  Lots of people don't want to pay points when they obtain a mortgage.  However, some novice borrowers and home buyers may think they are getting the same rate as other people who pay points...


...only without paying points.


That isn't how it works.


You pay now - or you pay later. 


On a $200,000 loan at today's rate, a quarter percent difference in payment means a difference in monthly payment of about $32.  That isn't a big deal, but if you keep the loan more than five years and two months, you save more money paying the point.  On a $300,000 loan the payment difference is $50 and you save more money after five years - by paying one point.


But this article is about advertising, not savings.


You see, the purpose of mortgage advertising is to make the telephone ring at the lender's office.  They make the telephone ring by leaving out key information or allowing you to make assumptions that are not quite accurate.


Mortgage lenders all get their money from pretty much the same place, but if they told you that in the ad, there would be no reason for you to call. 


The same loans everywhere.


To get some understanding of mortgage advertising, next Sunday look at the furniture advertising in your newspaper.  An ad promoting a "Five-piece bedroom set for $899!" will probably be in the advertising section along with a photo showing a beautiful queen-sized bed, a bureau with a mirror, a chest of drawers and two end tables.  Five pieces.  Being a smart consumer, you know you don't get the mattress, of course. 


So you pile into the car and drive to the furniture store.


But you don't get everything in the photo.  What you really get is the headboard, the footboard, the bed frame, the bureau and the mirror.  Five pieces, but not what you expected from the photo.


You made an assumption.


Mortgage ads work the same way.  They allow you to make inaccurate assumptions.


So what do you do? 


Except for mortgage lenders, who knows the most about mortgage loans?


Real estate agents. 


Ask your real estate agent for a referral.  They don't earn kickbacks from lenders (that's against the law), but they will know several local dependable lenders that will provide personal attention, walk you through the process, and be responsive to pages or calls to their cell phones.


So next time you see a mortgage ad on television and it promises fixed rates that are a full percent lower than what you see available on the graph in this newsletter, ask this question:


"What information is missing from this ad?"


They could be talking about a fifteen year rate.  Or a 30 year mortgage, but the rate is only fixed for the first five years.  And so on...


Be an informed mortgage consumer.  Read our Mortgage Articles that come with this newsletter by clicking here.



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