 |
Home Mortgages: How About Those 1.75% Loans?
You've undoubtedly heard or seen ads for mortgages with very
low interest rates such as 1.75%. For example, one mortgage
company in the city where I live is advertising a 40-year
mortgage with a 1.75% interest rate. That sounds like a pretty
good deal, doesn't it? After all, if you were to buy a house for
$250,000 with this rate, your payment (not including taxes and
insurance) would be only $632 a month.
Maybe this mortgage would be a good deal for you. But before
you leap to the phone or fill out an application, make sure you
understand how these mortgages work.
They are called option ARMs. This is because they offer four
options from which you must choose: minimum monthly payment,
interest-only payment, full principle and interest amortized over
30 years, and full principle and interest amortized over 15
years.
If you choose the minimum payment option, which is at the
advertised 1.75% interest rate, you pay nothing towards the
principle and less interest than what accrues on the loan. The
unpaid interest is added to the loan balance, and you become
subject to what's known as negative amortization.
In other words, as you make the minimum payment, your loan
balance will continue to grow. And, if interest rates go up,
which they are most likely to do, your loan balance will grow
even faster, to a point. For example, depending on your loan,
when your balance reaches a level, such as 110%, 115% or 125% of
the original balance, the loan is "recast," and your minimum
payment goes up.
There are two dangers to the minimum payment option. The first
is that the lower the "teaser" rate (usually 1.75%), the higher
the potential increase in monthly payments if the interest rate
goes up, as it most certainly will.
The second danger is that you could literally end up owing
more than your house is worth, In fact, one economist recently
said "They are a lot more dangerous (than an interest only loan)
because the borrower is giving away part of his equity, sometimes
unknowingly."
For example, on a $250,000 mortgage if the balance reached
115% due to negative amortization, the total mortgage would then
be $230,000.
It's difficult to compare a minimum payment option ARM with a
five-year fixed rate, interest only loan because pf the
differences between the two. However, for the sake of the
example, the payment on a $250,000 minimum payment option ARM the
first year could be as low as $632. However, because of negative
amortization, the balance owed on your mortgage could grow to
$210,000 or more by the end of the second year.
In comparison, a 5-year, fixed rate, interest only loan on
that same $250,000 at 5.50%, would have a monthly payment of
$1145.83. This payment would remain the same for all 60 months
(five years) and the balance of your loan would still be
$250,000.
So, what lesson is to be learned here? It is that option ARMs
can save you money but can be very complex. You need to fully
understand what you are doing before you sign up for one. Your
loan documents will disclose the risks, so read everything
carefully. The documents may have to tell the truth, but
marketing materials can be misleading. So read, read, read and if
there is anything that isn't clear, make your mortgage broker
explain it until you are certain you understand all the
details.
For FREE help with debt and credit, subscribe today to Douglas
Hanna's free email newsletter "8 Simple Steps to Debt Relief" at
http://www.all-in-one-info.com.
Douglas spent nearly 30 years in marketing working with a number
of financial institutions. He is also the author of the book
"Money Secrets - Real World Information for Today's
Families."
 MORE RESOURCES updated Thu. February / 09 / 2012
|
AgedLeadStore.com to Add 1100000 Aged Mortgage Refinance LeadsMiddle East North Africa Financial NetworkCOM, January 26, 2012 ) Baltimore, MD AgedLeadStore.com is increasing its value for its customers by adding 1.1 million aged Mortgage Refinance Leads in February. This is important as many people depend upon their ability to refinance to make progress ... |
|
New HARP Could Help Up to 6.7 MillionNASDAQOther changes to the program were designed to make it easier for homeowners with private mortgage insurance (PMI) to refinance or to obtain a HARP mortgage refinance with a lender other than their current mortgage servicer. In addition, new limits were ...and more » |
|
Boehner On Refi Plan: Bad Idea, Obama!Mortgageorbby MortgageOrb.com on Thursday 02 February 2012 Any hope for bipartisan support of President Obama's mortgage refinance proposal was squashed by House Speaker John Boehner, who dismissed the new initiative as a continuation of failed policies.and more » |
Google News
|
|
|
RELATED MORTGAGE AND REFINANCING ARTICLES:
Refinancing and Car
Finance - Is it worth it?
Refinancing and Car Finance - Is it Worth It? No doubt you
have heard of refinancing your mortgage. It has become all
the rage, but now you can also refinance your car loan.
Home Loans and Mortgages
- Beware of New "Mortgage Elimination" Scam
The booming real estate market has allowed many Americans
to become "equity rich." They may not have a lot of cash on
hand, but they might have equity in their homes worth
several hundred thousand dollars or more.
Why Refinance Back into
a 30-Year Loan?
One of the biggest reasons homeowners refinance their
mortgage is to obtain a lower interest rate and lower
monthly payments. By refinancing, the borrower pays off
their existing mortgage and replaces it with a new one.
Bad Credit Remortgage
Loan: When Bad Credit Plays Mischief With Your
Mortgage
Financial difficulties are married to bad credit. It is a
tough marriage but can be peaceful with a little bit of
counseling.
Low Home Mortgage
Interest Rate - Finding the Best Mortgage Rate
Interest rates are at an all time low, making now the
perfect time to purchase a new home or refinance your
existing mortgage. The interest rate you receive will
depend largely on your credit rating, monthly debt, and
your income.
What is a
Remortgage?
A remortgage is changing your mortgage without moving your
home. Remortgaging is the process of switching your
mortgage to another lender that is offering a better deal
than your current lender thereby saving money.
Financing a Home With
Bad Credit
Financing a home with bad credit is a common problem for
people. Over 25% of homes in the US are financed through
sub prime lenders, who offer financing to high-risk
borrowers.
Buying A Home?
Reasons to Consider Financing Your New
Home Loan Online
Financing your new home loan online can save you time and
money. With information at your fingertips, you can quickly
educate yourself about the loan process and compare
mortgage lenders to find the best rates.
Home Mortgage Lenders -
How to Find A Good Mortgage Broker Online
Mortgage lenders have set up shop online, but they aren't
all reputable mortgage brokers. To find a good mortgage
lender you need to compare rates and research to find
reputable companies.
What is a Fixed Rate
Mortgage?
As the term implies, with a fixed rate mortgage the
mortgage rate is fixed for a set period of time, so no
matter what movements occur in the lender's standard
variable mortgage rate, the borrower's arrangement is fixed
and, therefore, so are the monthly fixed rate mortgage
payments. A fixed rate mortgage would suit someone who likes
to know where they stand.
Mortgage Terms
Explained
When you are hunting for a mortgage, you will find that
there are many different types of mortgages available. I
will list some of the more common ones and their uses.
Composite Credit Report
Score Simplifies Mortgage Issues
Do you want a mortgage loan for your new home? Trying to
qualify for a new mortgage can be very tough, especially if
you aren't aware of the effect your credit report score has
on your ability to get approved for loans. One of the first
things a lender looks at to determine your suitability for
a mortgage loan is your credit report, or FICO score.
Jumbo Home Mortgage
Loans - What They Are and Where To Get Jumbo Loan
Financing
A jumbo mortgage is different than a conforming loan. A
jumbo loan amount exceeds that limit set by FNMA.
Understanding Fixed-rate
Mortgages
A fixed-rate mortgage is a mortgage on which the interest
rate is set for the term of the loan. Your interest rate
stays the same for the term of the mortgage or for a
specified period of time.
Residential Mortgage -
Finding The Best Home Mortgage Lender
Most people approach the act of getting a home mortgage
purchase or refinance loan the wrong way. They timidly
approach lenders and cross their fingers that they will
quality for that all-important loan.
How to Secure the Best
Mortgage Deal and Save Yourself Thousands in
Interest
When you consider that the average home owner will pay out
far more in interest over the lifetime of their mortgage
than their home actually cost in the first place, you can
see why working to secure yourself the best possible
mortgage deal now could save you tens of thousands of
dollars in interest over the 25 - 30 year lifetime of your
home loan. For the majority of us our house is the single
most important and expensive purchase we ever make! Because
this is the case we invest a lot of time and effort into
finding the perfect property in the most ideal location,
however few of us invest the time and effort we should into
researching and securing the best possible finance method
for purchasing our home.
Home Mortgage Interest
Rates: How to Compare
Whether you are looking to purchase your first home, sell
your current home and purchase a new one, or you are
wondering whether or not you should refinance your existing
mortgage, it is beneficial to compare current home mortgage
interest rates from several companies to be sure you get
the best deal possible. They can be researched very easily
online, and you can tailor your search to give you accurate
rates based on the state that you will live in, whether you
are buying or refinancing, and the amount of the loan.
A Qualified Mortgage
Consultant Can Help Boost Credit Scores
Consumers interested in purchasing or refinancing a home
will pay an interest rate based on current market
conditions and their ability to pay back the loan. The
borrower's income and debt ratios are taken into
consideration by the lender, as well as the predictability
factor provided by credit scoring.
Sell Your Home and
Invest at the Same Time
I continue to see the same For Sale signs in my
neighborhood. The houses just aren't selling.
Reverse Mortgage
Maximization
Have your home's appreciation grow twice as fast. For
Seniors over the age of 62 a Reverse Mortgage is a tool
that, while new to many, is increasingly being used to
maximize their retirement income.
|
used office furnishings-supplies-equipment-desks-cubicles-service-counters for
sale in Akron Ohio
Die cast model cars for sale in Akron Ohio
used cars for sale in Akron Ohio
unfurnished homes for
rent in Akron Ohio
| first second
ARM compare rates find the best rates current in your area lenders read reviews calculator adjustable rate loan home lenders brokers
quotes florida houston gmac washington interest only 2nd software debt consolidation
reverse senior equity texas maryland options lending bad credit
option one ameriquest chase first banks emc residential california miami dallas est branch marketing
home company commercial yahoo online bad credit low credit no credit |
|
