Quote:
Originally posted by Moneyguy1
Get a Texas Instrument BA35 (or equivalent, mine is 11 years old). It allows you to try different scenarios re: present value (amt of loan), interest rate, monthly payment (or any periodic payment arrangement) and number of payments. Entering datum for any three permits you to calculate the fourth.
The thing that is fascinating me recently is the proliferation of "interest only" loans. Talk about betting on increased property values!!! What happens if the property value drops below the loan amount? Will the banks come after the individual like stock brokers do for folks who buy on margin?
Just some idle ramblings....
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The interest only loans are definitely geared for the overextended crowd. They usually are based on shorter term adjustable loans such as a 2/28 or 5/25) - so you have the option to pay I/O anywhere from 2 to 5 years, which is exactly the term which they are fixed. Never seen an I/O that was a true 30 fixed.
They also count on you wanting to refi in 4 years to bail out the lender.
Usually the lenders limit the Loan To Value on an I/O loan typically to 80 - 85% so basically the value of the property has to depreciate over 20% in 3-5 years for the lender and borrower to get into trouble.
Next thing which is really a funky loan is the 1.95% Neg - AM option. That's the one on TV they're talking about a "payment" based on 1.95%.
That's the payment, not the interest charged against the loan, which is adjustable month to month (presently floating on the average around 6%) , and can potentially caused dererred interest to be accrued on the balance. If you're screwing with this type of loan you had better be one hell of a stock broker or serious investor to make this work in your favor. Once you exceed the orignal balance you borrowed by 15% due you constant deferrment then the lender will amortize the remaining balance into the remaining term at the prevailing interest rate, with no more option to defer payments.
It's not for the average guy who just wants to pay off his house.
rjp