A home buyer can pay more for a mortgage than if they were renting the property and are looking to sell it, according to a report released Tuesday.
The report by the National Association of Realtors (NAR) says many real estate agents and mortgage brokers do not understand the difference between a mortgage and an equity loan.
A mortgage is a loan to purchase a property, usually a home.
An equity loan is a mortgage that is guaranteed by a bank.
In most cases, an equity mortgage has a lower interest rate and usually offers lower payments, but it usually comes with a higher down payment, too.NAR’s mortgage broker said many realtors have trouble understanding the difference.
“I don’t think many people understand the distinction,” said Mike Dittrich.
Dittrich, an executive vice president of mortgage broker P&G, said the NAR study found that some realtor representatives are misinterpreting what an equity is.
For example, an example of an equity would be a house with a $300,000 down payment and a 30-year mortgage.
The realtor would use an example like this to show potential buyers what an Equity Mortgage is,” he said.
But, a homeowner with $300 million in debt can pay a mortgage of about $500,000 if they are willing to pay the $400 monthly fee, he said, adding that it’s not a bad investment.
Ditto for a homeowner who owns a $2 million home, but is willing to shell out a few hundred thousand dollars more for an equity.”
It’s really hard for the realtor to get the information out there.
You have to be really careful about what the terms of the mortgage are,” Dittbrys said.
The NAR found that realtorship representatives were also less than enthusiastic about the terms and conditions of a mortgage.
In fact, they said the mortgage should be structured in such a way that the mortgage is adjustable, which means it can be purchased with cash or a down payment that can change at any time.
The NAR also said realtORS should also have a plan for a downpayment so that it doesn’t decrease during the mortgage, as it would be hard for an individual to make a downpayment when he or she has so much debt.
In addition, the NARR found that mortgage brokers are too hesitant to let the buyer and seller discuss the financing options when they negotiate the loan terms.NARR said that while a mortgage can be secured by an equity, the lender typically does not have to offer the equity in the form of a loan because most mortgage lenders offer the same loan at varying rates.
Realtors and mortgage broker representatives should be able to explain the financing terms to buyers and sellers, but they must also be able convey the value of the loan to the borrower, according the NARP.
Real estate agents should also make sure buyers and seller understand the financing and terms of their loan, the report said.”
You should always make sure that you understand the options that are available to you,” Ditto said.DITTBRY also recommended that realtor representatives also take the time to talk to the buyer about the financing before they offer the mortgage to him or her.”
If the buyer doesn’t want to go through the process, it’s best to let them know that,” he added.
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