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Lenders More
Focused On
Drumming Up
Business Instead of
Being
Completely Upfront
Use Smoke & Mirrors to Entice You
When advertisers use
1.75%
or
1 % "Teaser
Rates"
Lenders use "Teaser
Rates" which are a below-market interest rate to entice customers. It is by no means the
interest rate you genuinely pay. The real rate
on all ARM products is the "Fully Indexed Rate"
These exotic loans
have immense risk
● Interest
Rate Risk ● Payment Shock ● Disciplinary Failure
Less experienced
loan reps do not
fully understand the future ramifications of this loan. Although they
say they do. Their
intentions may be sincere (maybe) but they are promoting a loan program
that is extremely risky and potentially harmful to the consumers financial future.
With the right circumstances the customers house payment could more than
double from what they had before they refinanced.
A number of loan officers
today have less than 5 years experience.
Verify how
long a loan officer has been licensed
Obtain their
name and/or license number
Verify with
the state of Texas
http://www.sml.state.tx.us:8080/mblolookup/search.jsp
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The
Fully Indexed Rate
is determined by adding the current value of the chosen index
plus the margin on an
ARM.
Teaser Rates,
the advertised rate
on ARMs are below the fully indexed rate.
If the value of the index rate rises, your interest rate will rise.
ARM loans often have
caps
which help limit
the speed of rate increases.
For
example: if the initial rate is 4% for 1 year
but the fully indexed rate is 7%,
and the loan has a 1% cap per
year, the 7%
rate will increase 1% per year and reach
the Fully Indexed rate of 7% in 3 years.
Option ARMs often only have a life cap therefore customers are charged the
Fully Indexed Rate immediately. Any difference between the Fully
Indexed Rate and the Payment you make causes your loan balance to increase
which is called
Negative Amortization
also called
Neg Am
for short.
click here for info about
Negative Amortization Loans
Some lenders falsely advertise
these as a way to become
"Absolutely Debt Free"
They suggest
shifting non tax deductible credit card debt to your tax deductible home loan by
making a minimal payment.
The truth is
. . the math is flawed.
Homeowners
sacrifice tens of thousands in equity.
Add
$50,000 to
your mortgage to pay
$20,000 in credit cards.
Where's the
"Absolutely Debt Free" part?
Credit Card Debt
Management Without Refinancing
click image for info
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