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Misleading Mortgage Rates and Programs

A mortgage and it's subsequent payment is so complicated and complex that nobody can actually advertise one fixed rate or payment without thoroughly interviewing a potential borrower. There are too many factors that will influence a homeowner's interest rate for a mortgage lender or bank to simply state a rate on a banner ad or television commercial. Sure there may be introductory rates that are fixed for the first few months, or even a year, but those are just teaser rates, and will disappear quickly and leave most homeowners with even more interest to make up.

Whenever a mortgage company offers a lower rate, or some cute program named flexpay, smartpay, pickapay, secure advantage or whatever else, they're basically presenting potential borrowers with a way to avoid paying their full interest payment. This practice is referred to as negative amortization, otherwise known as deferred interest because the borrower pays less than the monthly interest payment.

While these lenders make it out to be a great cost-savings plan for any homeowner, it actually hurts most borrowers who make payments that not only don't pay off any principal, but actually don't pay even pay off the interest on the loan. Sure the lender is telling you the truth to a certain degree. You will make smaller payments than the borrower who paying "x" amount, but you'll also end up in a larger amount of debt. This is the part they don't seem to mention too often.

Not only are lenders telling borrowers to pay below their actual monthly interest rate, but they're also putting the borrower in monthly adjustable-rate mortgage products that offer zero rate stability.

While it might make sense to some, unless the market appreciates at a greater rate than the interest rate, homeowners will lose money if they choose this mortgage program over the long-term. These types of low-interest or deferred interest mortgage products are usually only helpful for investors who flip properties around quickly and don't like too much out-of-pocket expense. Unfortunately unassuming families are getting into these high-risk loans and finding themselves in sticky situations.

So do your homework when it comes to picking out the right home loan for you and your family. The lowest payment is usually not going to the lowest payment for the long haul. And don't be fooled by a teaser rate that expires after a few months. You'll find yourself with a much higher rate, and back at the bank looking to refinance your loan into a fixed mortgage product.

With the holiday shopping season upon us, Consumers Union is warning shoppers about the increasing number of credit card traps that can trip up consumers and lead to spiraling debt.
"You can find yourself buried in debt if you aren't careful to avoid the credit card gotchas," said Michelle Jun, Staff Attorney for Consumers Union. "Too many credit cards are designed to get you in debt and keep you there."

Consumers enjoy few protections when it comes to credit cards, according to Consumers Union, and there are an increasing number of ways they can be penalized with fees or get stuck with higher interest rates:

• Universal default: Your interest rate can skyrocket if your credit score declines because of your behavior with other creditors even if you always pay your credit card on time and never miss a payment. Some card issuers will raise your rate if you inquire about a car loan or open a new credit card.
• Change of terms: Credit card terms keep changing. Read the fine print and chances are you'll find this disclosure: "We reserve the right to change the terms (including the APRs) at any time for any reason." A fixed rate is fixed until the bank gives you at least 15 days notice that it isn't. If you want to keep your account open, you'll pay the higher new rate on your existing balance.
• Teaser rates: That low rate you signed up for expires suddenly and you end up paying more. A temptingly low introductory rate can climb to 30 percent or more.
• Minimum payment: If you pay the minimum payment every month, you'll end up paying a lot more than what you charged and you could be on the hook for a very long time.
• On time payment: Card issuers are systematically mailing statements closer to the due date, giving customers less turnaround time. You can be hit with a late fee even if the payment is mailed on time. The average fee for a late payment has more than doubled in the past decade.
• Double cycle billing: Finance charges are usually calculated using the average daily balance. If you alternate between paying off and carrying a balance, you'll end up paying more interest.