Facebook Twitter

FINE PRINT REVEALS DEALS THAT ARE NOT SO FINE

SHARE FINE PRINT REVEALS DEALS THAT ARE NOT SO FINE

At first glance, the offers for these home-related financial products may look tempting. But fine print reveals details that ultimately make them a bad deal.

Among the worst:- MORTGAGE LIFE INSURANCE. You should have life insurance to cover your survivors' mortgage payments and expenses, but mortgage life insurance isn't your best bet. It usually makes your lender, not your heirs, the beneficiary.

If your health is good enough to qualify, ordinary term insurance is a better buy. You can choose your own beneficiary, and your beneficiary can decide whether it's in his or her best interest to pay off a low-rate, tax-deductible mortgage.

- BIWEEKLY MORTGAGE-PAYMENT PLANS. For a fee of $300 or more, you can sign up with a firm that will accept half your mortgage payment every two weeks, then pay your lender. The plan allows you to pay off principal faster and slash interest costs because you end up making an extra month's worth of payments each year.

You can do the same thing, however, by making a prepayment of principal along with your regular monthly payment. Be sure to mark it clearly as a prepayment of principal, and keep an eye on your mortgage statement to make sure it's been credited correctly.

- REVERSE MORTGAGES FOR A SHORT TIME. Reverse mortgages allow elderly homeowners to borrow against their home equity with the guarantee that the money need not be paid back until after they die or move out of the house. But they carry big up-front costs and are very expensive if you keep them only a few years.

Depending on the plan you choose, the short-term total annual loan cost (TALC) rate - a wrap-up of the interest rate and other incurred expenses - can run as high as 116 percent at the end of two years.

A somewhat less costly alternative for people who are certain they will remain in their home for only a few more years is a fixed-term reverse mortgage. Fixed-term plans must be repaid within five to 12 years, depending on the term you lock in, or when the homeowner dies or moves out of the house, whichever is earlier.