Interest-Only Loan Secrets Revealed!

As of late, more and more people are opting for “interest-only loans”. But they are actually only appropriate for a small group of borrowers. And in some cases, they can be the equivalent of “financial death”.

Here is what you will learn in this report:

• What is an interest-only mortgage?
• How to know if you are a candidate for an interest-only loan
• Common Interest-Only Loan Myths
• How to determine if you qualify for an interest-only loan

Is an interest–only loan right for you?
Find out by reading the full report below.

What is an interest-only mortgage?
 

An interest-only mortgage is a special type of mortgage loan which allows you the option of only making payments on the interest each month. If you have an interest-only loan, you are not required to pay principal and interest every month, as you are with a traditional mortgage loan.

You have the right to choose to only pay interest. Usually, the option to pay interest-only lasts for a specified period, usually 5 to 10 years.

WARNING: If you choose to pay only interest every month, you will never pay down your loan balance and your original loan amount will remain unpaid. (Example - if you obtain a $125,000 mortgage loan and pay only interest and no principal for the first 10 years, your loan balance will still be $125,000 at the end of year 10.)

How to Determine if an Interest-Only Loan is Right for You

The first question you need to ask yourself is this: “Am I disciplined enough to pay into a quality investment when I’m not required to?” If the answer is no, an interest only loan may not be right for you.

Many borrowers opt for an interest only loan to be able to afford a home they would not otherwise be able to afford with a traditional mortgage. We advise against this practice. Only purchase a home if you can afford to pay a full interest and principal payment every month. The consequences of purchasing more home than you can afford can be serious.

An interest-only loan may be right for you if you have a fluctuating income and need the flexibility of paying interest-only when you are strapped for cash. Consultants and other professionals love interest-only loans for this reason.

Additionally, an interest-only loan is great for people who want to invest the money that would have otherwise been paid toward principal into a higher-yielding investment. For this to succeed, your return on investment must exceed the mortgage interest rate on your interest-only loan.

Common Interest-Only Loan Myths

Myth #1 – Interest only loans don’t require mortgage insurance

Interest-only loans having a down payment of 20% or less require mortgage insurance in many cases. Some interest only loans are insured by the lender as opposed to a traditional mortgage insurance company. This means that you will pay for the insurance, but it will come in the form of a slightly higher interest rate. Make sure you ask the lender if, and how, your loan is being insured...

Myth #2 – Interest-Only Loans amortize faster than regular loans

Interest-only loans amortize no faster than a traditional loan. As a matter of fact, while they are still in their “Interest-only” stage, an Interest-Only loan doesn’t even amortize at all! There is no magic connected to amortizing an interest-only loan.

Do YOU qualify for an Interest-Only Loan? Did you know that most people can easily qualify for an interest-only mortgage loan? Although the interest-only option is not available to everyone, it is unlikely you will be turned down for a mortgage altogether.

Should I Pay Points to Reduce My Interest Rate?

A common question among borrowers is “Should I pay Points to Reduce my Interest Rate?”

In this report, we’ll discuss this topic in detail and show you how you can determine

if paying points is the right decision for you. Let’s get started!

What are Points?

In their simplest form, Points are up-front mortgage interest fees paid on a loan to reduce the initial interest rate. Points are fees the borrower pays the lender and the lender passes on to the investor at the time of loan closing. If you pay one point (1%) on a $100,000 loan, then you will pay the lender $1,000 at loan closing.

Most people pay points to reduce their long-term loan interest rate. For example, if you are taking out a loan, and the lender says you qualify for a 7.25% interest rate, it may be possible to reduce the interest rate to 7.0% or less by paying points. This is similar to making an investment. Your monthly payment and total interest over the years will be reduced by paying points.

Am I required to pay Points?

First, it’s important to understand that you are not required to pay points. It’s your decision. Points are a direct trade-off for a lower rate.

If you watch TV or read the newspaper, you might have thought you were required to pay points. The rates you see in the newspaper and on TV are usually expressed as a loan rate and points (i.e. - 6.75% and 2 points). But most lenders will be willing to remove points and simply charge a higher interest rate instead.

Should I pay Points?

Most lenders offer loans with 0 points. This may seem attractive at first, but you need to calculate how expensive a 0 point loan will be over time, because it’s quite possible you could obtain the same mortgage with a lower long-term interest rate, by paying a couple of points.

The main factor in deciding whether or not to pay points is the length of time you plan to live in the home you are purchasing or refinancing. As a general rule of thumb, you should only pay points if you plan on keeping the mortgage for more than 4 years. Because points are prepaid interest, you need to be sure you will keep the loan long enough to recoup these costs through lower monthly mortgage payments.

Tax Advantages

Another consideration you should take into account is the potential tax advantage that points represent. If you are purchasing a home, any points that you pay up-front are immediately tax-deductible. If you are refinancing, however, points ARE NOT tax-deductible and must be amortized over the life of the loan...

How to Make Sense of This

Take this short pop-quiz to see how prepared you are to make an informed decision on your next purchase or refinance:

1.)    Should I pay points or not?

2.)    Since there are hundreds of loan programs, how do I know
which one is best for me?

3.)    How can I tell if I am getting the best rate?

4.)    How will the choices I make with now affect me 10-15 years
in the future?

5.)    Which loan choice will allow me to have a better retirement
or money for my child’s college education?

DANGER! - 5 Buyer Traps To Avoid!

Which one of these mistakes will you make?

Your home purchase will be the largest investment you will ever make. To the uneducated and uninformed buyer, this process can be overly expensive and emotionally draining. In this report, we will uncover the 5 most common and costly buyer mistakes and hopefully educate you so you can avoid the following situations:

- Buyinga home that doesn’t fit your needs
- Paying too much for your new home
- Missing out on your dream home

The 5 Biggest Buyer Traps and How to Avoid Them

Buyer Trap #1- Not Obtaining a Mortgage Pre-Approval

In some areas, a seller may not even deal with you until they can verify that you can actually afford to purchase their home. To them, a pre-approved buyer is essential. But even in cases where pre-approval is not mandatory, it is still wise to consult with a reputable mortgage company and receive a pre-approval. Especially considering that the pre-approval process is fast and easy…not to mention FREE !

Once you are pre-approved, you can embark upon your home buying journey with confidence, knowing that once you find your dream home, obtaining the money to buy it will be the easy part!

Identify and understand all charges and fees far in advance. Many times, at closing, you will discover fees you might have not previously been aware of, sneaking their way onto your loan closing documents. These fees, in many cases, are standard, and include such items as underwriting fees, document preparation fees, and loan disbursement charges.

TIP! - Any reputable lender will provide you with a “good faith estimate” of fees far in advance of the closing date. If you are uncertain as to why you are being charged a certain fee, always ask. A good lender will take the time to explain all fees and charges to you.

Buyer Trap #3- Not Developing a “Home Purchase Strategy”

How sure are you that you are getting the best deal on your new home purchase? Are you simply taking the Real Estate Agent or Seller’s word for it? It is possible that the home you thought was such a great deal is actually priced hundreds or even thousands of dollars more than it should be.

Market conditions fluctuate constantly in this area. It takes an intimate knowledge of the local home market to be able to bid properly on any home purchase. Without knowledge of the current market conditions, you will be bidding blind. This can lead to one of two situations:

a) Bidding too much and wasting thousands of dollars; or
b) Bidding too low and failing to make a competitive offer

Buyer Trap #4 - Hidden Repair Costs

Obviously, not every seller will be eager to point out every problem or potential repair job that exists on their property. It is essential that you know about these problems before your purchase the home so you can negotiate a lower price, or at least anticipate the repairs. Why wait and be surprised by hidden repair costs shortly after moving into your new home?

Our Advice: Hire an independent Inspector to conduct a thorough inspection of the home.  Then, make the final contract contingent upon the inspector’s findings. In most cases, the inspector can provide a report of all the items in need of repair, and help you estimate the costs involved with those repairs.

Buyer Trap #5- Survey and Title Issues

Request an updated property survey which clearly marks the boundaries of your new home. Also, make sure that early on in the negotiating process you request a title search on the property to ensure that you will own your new home outright after the purchase is complete. The property survey, if current, will show you any structural changes, property additions (like swimming pools) or other features which are too near or extend beyond the property line. If these are out of regulation, you could get fined.

The Title Search will help you ensure that no liens, easements, or undisclosed owners are attached to the property. Play it safe and request this in advance. Any good mortgage company will provide this service, for a fee during the loan process.

7 Questions Lenders Hate!

There are tens of thousands of mortgage companies in America . In some states, you don’t even need a license or any experience to originate mortgages.

Because of the sheer amount of choices you will have when you go to obtain a mortgage loan, you need to ask some specific questions before choosing a lender. Asking the right questions will help you find a lender who will offer you great service and low rates/fees. It might also help you avoid a mortgage scam.

Remember, as the client, you are in the driver’s seat. This is your chance to be the big boss and ask the important questions. Interview your mortgage lender using the questions below:

Question #1: Why Should I Choose YOU as my Mortgage Lender?

All mortgage companies say the same thing. “We have the best service.” “We offer the lowest rates.” The truth is, ANY mortgage company should offer decent service and low rates. This is why you should be looking for something unique.

Ask yourself this question: “What can this lender give me that no one else can”. You should look for a lender who offers special services that go above and beyond the call of duty.

Question #2: How Many Points Will You Be Charging?

For instance, we offer services like the VIP Home Buyer Program, Agent Locator Service, and more. We give away FREE reports and helpful information to all of our valued clients. We offer FREE coaching sessions, credit reports and pre-approval services. We guarantee the lowest cost and we promise to provide not just good service, but “Exceptional Service”. Does the lender you are currently interviewing offer to do any of these services?

In their simplest form, Points are up-front mortgage interest fees paid on a loan to reduce the initial interest rate. Points are fees the borrower pays the lender at the time of loan closing. If you pay one point (1%) on a $100,000 loan, you will pay the lender $1,000 at loan closing, but will reduce your long-term interest rate, which will save you money throughout the life of your loan.

Some loan rates have points already built-in, so you need to make sure the lender is very clear on how many points are being charged.

Question #3: How long will my Loan be in Process?

When you apply for a loan and get approved, the loan process is just getting started. The Time between your application date and your closing date is called the “in-process period”. This is when your loan documents are being prepared, processed, underwritten and closed. After this process is complete, your loan will fund. The speed of the in-process period varies from lender to lender and can also be affected by other factors such as the type of loan you choose and how quickly you provide information to the lender. Most loans are processed and funded in 30-days or less. You should inquire with your lender to determine how long it will take to process and fund your loan...

Question #4: What Loan Rate do I qualify for?

Lenders love to run ads on TV and radio bragging about their super-low rates. Unfortunately, these rates aren’t all they’re cracked up to be. The rates you see in these advertisements are usually based on the best-case scenario. They require that you pay additional up-front fees and that you possess a perfect credit history in most cases.

This is why we refuse to post rates on this website. It would be a disservice to you, the valued client. Hundreds of loan programs are available and your rate will depend upon which program you choose. Choosing the wrong program might get you a great interest rate, but cost you tens of thousands in the long-run for other various reasons.

Question #5: When will you lock in My Loan Rate?

Ask your lender what their policy is for locking in loan rates. Until you lock-in your loan rate, you will be subject to fluctuating market conditions and loan rates. A 5.75% loan rate today might be 6.25% tomorrow. But if you lock in your loan rate, you can ensure your loan rate is guaranteed for a certain number of days, no matter what the market conditions. So, make sure you ask your lender how they decide when to lock-in your loan. Also, be aware that most lenders charge a fee to lock-in a loan rate. Ask what these fees are ahead of time.

Question #6: What is your track record?

Any reputable lender should be able to provide you with a list of testimonials of previously satisfied clients. Some lenders might even be able to show you past-client surveys to prove how good their service was. Ask your lender to provide you testimonials. Be aware, however, that lenders are not allowed to, or might not be willing to, let you contact previous clients directly for confidentiality reasons.  

Question #7: Can you Guarantee the Lowest Bottom-Line cost?

All lenders are required by law to provide what is called a Good Faith Estimate of Closing Costs. Use this “Good Faith Estimate” as a tool to find the lowest price. You should ask any lender you speak with for a guarantee that clearly states, in writing, that they have the lowest bottom-line closing cost. If they can’t provide you such a guarantee, in writing, you should find another lender.

How to Avoid 5 Costly
Refinance Mistakes

Mistake #1 – Refinancing only to obtain a lower interest rate

So why are you refinancing your mortgage loan? Are you trying to save money through a lower monthly payment? Are you trying to reduce your interest rate? Are you hoping to combine your refinance with a cash-out equity loan?

If you’re simply trying to find a lower interest rate, make sure you calculate the related fees and closing costs. These fees might make you rethink the process. Unless you can save enough money to easily cover these costs, refinancing may not be right for you.

Mistake #2 – Cash-Out Refi to Pay off Unsecured Credit Card Debt

Many people opt for what’s called a cash-out refi. This not only can save you money on your monthly mortgage payment, but can provide you with cash to pay off high-interest credit cards. We recommend that you review all of your options before choosing this path. Are you really desperate enough to get rid of your unsecured debt that you would consider putting your home on the line? Review other options first, like calling your creditors and asking them to reduce your interest rates and save your home equity for a rainy day. Remember, you can always refinance without having to touch your home equity.

Mistake #3 – Not Asking About Points

In their simplest form, Points are up-front mortgage interest fees paid on a loan to reduce the initial interest rate. Points are fees the borrower pays the lender at the time of loan closing. If you pay one point (1%) on a $100,000 loan, then you will pay the lender $1,000 at loan closing, but will reduce your long-term interest rate, which will save you money throughout the life of your loan.

Some loan rates have points already built-in, so you need to make sure the lender is very clear on how many points are being charged.

Mistake #4 – Refinancing into an ARM or Interest-Only Loan

In some cases, it makes sense to refinance into an Adjustable Rate or Interest-Only loan. But be aware of the ramifications. While you might refinance into an ARM and initially save money; over the years, your interest rate may creep up and end up eating-up the refinance savings.

Interest-only loans are another popular option, but they’re not right for everyone. Interest-only loans are actually only “interest-only” for a short period of time, like 5-10 years. This means that eventually, your payment will start to include principal again, and if you can’t afford to pay the principal at that time, you might be forced to refinance again! Always plan long-term...

Mistake #5 – Not getting a Guaranteed Lowest Bottom-Line Cost  

All lenders are required by law to provide what is called a Good Faith Estimate of Closing Costs. Use this “Good Faith Estimate” as a tool to find the lowest price. You should ask any lender you speak with for a guarantee that clearly states, in writing, that they have the lowest bottom-line closing cost. If they can’t provide you such a guarantee, in writing, you should find another lender.