A few entrepreneurs are developing new tools to help home buyers tackle one of the most confusing projects they face: figuring out whether a mortgage is a fair deal.Click here for the whole thing (Note: online subscription required.
Comparison-shopping for mortgages has long been a job only a masochist could love -- a world of "points," "ARMs" and a barrage of surprise fees. In recent years, it has become tougher amid the proliferation of complex new interest-only mortgages and others designed to enable buyers to delay more of the pain of paying off that debt.
Now, as interest rates climb, it is important for mortgage borrowers to aggressively shop around for the best terms. Over 10 years, a difference of just 0.125 percentage point on the mortgage rate on a $500,000 loan can rack up more than $6,000 in extra interest payments.
The problem for borrowers is that lenders have a vested interest in making it tough to compare rival offerings.
"The general public, they think they know how to shop for mortgages," says Mike Stoffer, who owns a mortgage brokerage in North Canton, Ohio. "They have no clue."
Some entrepreneurs are stepping in to give consumers some added muscle. One of the quirkiest tools available is a Web site, www.mtgprofessor.com, by a maverick retired finance professor who has made a hobby of skewering mortgage lenders. The site is a compilation of tutorials, calculators and a glossary defining everything from "balloon mortgage" (one that is payable in full at an early date) to "right of recission" (your right to back out of a refinancing within three days of closing).
The article makes a good point - once you get outside the "plain vanilla" 30-year fixed mortgage market, a mortgage loan can be an extremely complicated product. It becomes very hard to compare all the facets of a loan. So, good resources are golden. I have a finance Ph.D., and I'm a bit of a research junkie (it comes with the academic turf - people like me often end up in the academy, since we don't fit anywhere else). But, even with those advantages, getting my first mortgage was extremely frustrating.
The best option is to have a good, honest mortgage broker on your side. Unfortunately, since it's a complicated product, it's not just hard to evaluate the product, but also to evaluate the competence and honesty of the person selling it to you.
Having checked out the www.mtgprofessor.com site, I'd definitely recommend it. Another good site is Bankrate.com, which has a wealth of resources.
Finally, there are a couple of bloggers that I regularly read that have a lot of good mortgage-related content - Searchlight Crusade and Pacesetter Mortgage. Of course, as I mention them, I realize that I've been reading them for months, I never got around to adding them to the blogroll. Sorry guys, you're on now.