Local bank president answers your financial questions

June 6, 5:20 PMWomen of the Web ExaminerBrit Horvat

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Valorie Simpson is president of Colorado Business Bank Northwest.
 

Valorie Simpson is your go-to gal for all things money and finance. If you're looking for somewhere to turn for advice with those big decisions involving your bank account, sanity and security, she's your lady. She's been the president of Colorado Business Bank Northwest in Louisville for five years and was president of U.S. Bank in Boulder for seven years. Every other week or so, you'll find her dishing out financial advice here.

This week's advice: Don’t ever sign anything you don’t completely understand

The recent mortgage crisis has highlighted the consumer’s lack of knowledge in the area of loan documentation. If it makes you feel any better, I would say that 95% of the population is intimidated by financial documents. True, it isn’t rocket science … but it does take some time to understand. It’s important that you don’t let anyone make you feel like your questions are dumb … or don’t deserve an answer. Remember, you have the right to completely understand what you are signing. If it isn’t absolutely clear, ask someone else in the same field to explain it to you.

Let’s use mortgage loan documents as an example. The documents will disclose all the terms of the loan, (e.g. current rate, maximum rate, how long the term is, and so on). Have your lender calculate for you the highest monthly payment you will ever have to pay under the terms of the promissory note. If it is an adjustable rate mortgage, the rate could increase annually. Make sure it has a lifetime maximum, and you are comfortable with what the loan payment amount could be in the future. Don’t forget to add real estate taxes and homeowner’s insurance to your payment. If you pay interest only for the first five years, your loan payment could increase not just because of rate, but it will begin amortizing, which means you will pay interest and principal, also dramatically increasing the payment.

I have received numerous phone calls over the years from women telling me they are getting a divorce, and don’t owe the bank money anymore according to the divorce decree. I then have to inform them they are still obligated to make the payments to the bank, regardless of what the divorce decree states. Why? They signed a promissory note, and the divorce decree does not supersede the bank debt obligation.

Make sure you understand what you are signing.