Episode 005 1995 - 96 Season
| Window Factory | Vinyl Windows | Air Infiltration | Window Replacement | Cleaning Steam Iron | Sponge Painting (design) | Adjustable Rate Mortgage | |
To order a Video Tape, call 1-800-TO-BUILD and ask for Episode #005.
Michael Holigan : Today we're going to talk about my favorite type of loan. That's an adjustable rate mortgage. A number of people are scared of 'em, but they don't understand how they work now. They're not the old ones in the past that were very volatile. These are safe adjustable rate mortgages. Let's take a look and compare it to a fixed rate. For an example, we're going to use $100,000 sales price. We're going to use a loan amount of $95,000 which means we put five percent down, $5,000. We're going to use a fixed rate of eight percent. That gives us a principle and interest of $697 per month. An adjustable rate mortgage normally starts about two percent below the fixed rate. So if we're using eight here, we're going to use six percent on our adjustable rate mortgage. $570 a month principle and interest. A savings of almost $130 every month. Now, an adjustable rate mortgage does move, so we need some caps. Now we're going to have caps, a annual cap and a lifetime cap. Let's look at in on a conventional program. Your cap is two percent a year. That means that the loan cannot change interest rates more than two percent each year, and it can up two percent and it can go down two percent according to the margin and indexes that it's based on. Over the life of the loan, worse case, six percent up or down. Now if you start at six percent, worse case, 12 percent. FHA, by far and away, my very favorite adjustable rate mortgage, one percent a cap each year, five percent over the life of the loan. So worse case, if you started at six, you would go to 11 over five years if it went up every year the full maximum one percent. The great thing is, they don't do that. If you look at the history of them, they go up, they go down based on their indexes, but they can't change more than once a year. They can't change more than one percent each time they do it on a FHA adjustable rate mortgage. Talk with your lender about what the rate starts at, how often it can move, where it's going, what payment you're comfortable with, and give a hard look to adjustable rate mortgages. I like 'em and I think you will too.
Episode 005 1995 - 96 Season
| Window Factory | Vinyl Windows | Air Infiltration | Window Replacement | Cleaning Steam Iron | Sponge Painting (design) | Adjustable Rate Mortgage | |
To order a Video Tape, call 1-800-TO-BUILD and ask for Episode #005.