Financial documents can be confusing. Mortgage loan documents can be more confusing than most, because most people only purchase a home once or twice in their lifetimes, and have few chances to gain experience with the process. The mortgage crises of the last decade showed that many borrowers failed to understand the implication of the documents they were signing. And that failure had monumental consequences when those borrowers began to default on the loans they could not afford. For many, it led to foreclosure and bankruptcy.
The recent survey from Zillow, a real estate website, found that almost 30 percent of homebuyers did not understand how to choose a lender or obtain the best financing. Many did not understand what terms like “annual percentage rate” (APR) means, and we assume, failed to grasp what a difference in rate means over a 30-year mortgage.
As the article explains, a half percent in APR can mean $10,000 in savings in interest payments during the life of a mortgage. If you use that to pay down principle, you can cut three years off the term of the mortgage.
If you have fallen behind in your mortgage payments and are worried you may lose your home, you should consider speaking with a bankruptcy attorney. A Chapter 13 bankruptcy can allow you to pay your arrears over up to five years.
In addition, you may be able to discharge a portion of your unsecured debts, like credit cards, that will free up money to pay towards your mortgage. This may allow you to regain your financial stability and save your home from foreclosure.
Source: CNNMoney.com, “Homebuyers clueless about mortgages,” Les Christie, May 9, 2013