Warning: include() [function.include]: URL file-access is disabled in the server configuration in /usr/home/ms/domains/hurryloan.com/html/answers.php on line 78
Warning: include(http://www.hurryloan.com/rightbar.php) [function.include]: failed to open stream: no suitable wrapper could be found in /usr/home/ms/domains/hurryloan.com/html/answers.php on line 78
Warning: include() [function.include]: Failed opening 'http://www.hurryloan.com/rightbar.php' for inclusion (include_path='.:/usr/local/share/pear') in /usr/home/ms/domains/hurryloan.com/html/answers.php on line 78
|
| Question |
 |
I need to find out all about these interest only mortgage loans! Can anyone help me?
I have heard horror stories of people trusting the mortgage broker and not many people read the fine print and have paid heavier penalties than they were orignially told it would be.
|
| By
Peapie |
Posted on
09/07/07 Total Answers
5 |
|
| Answers- |
| what is the question? |
| Answer by :
zib On Date
2007-09-07 17:12:53 |
|
| Without a specific question, we can't really help you. If you're asking whom to trust, start with your bank for information. |
| Answer by :
tonalc1 On Date
2007-09-07 17:16:03 |
|
| I am not sure what you are asking. You should read anything you sign yourself, or have a trusted person, who is uninvolved, do it for you. |
| Answer by :
Landlord On Date
2007-09-07 17:17:13 |
|
| Hopefully you aren't in an "interest only" loan. If you are you probably need to do your homework on getting out of it.
here some scope!
An interest-only mortgage is one that allows borrowers to pay only the interest for some specified period. The required monthly mortgage payment includes no repayment of principal, though borrowers can make such payments if they like.
For example, if a 30-year fixed-rate loan of $100,000 has an interest rate of 6%, the standard "fully amortizing" monthly payment is $599.56. This payment, if continued with the same interest rate, will pay off the loan at maturity. The interest-only payment, however, is only $500. The interest-only borrower saves $99.56; the borrower with the amortized loan puts that same amount toward repaying principal.
These loans in the '20s were interest-only for their entire life, usually five to 10 years. This meant that the loan balance was the same at maturity as at the outset. Borrowers who were still in their houses could then refinance.
Foreclosures galore
This worked fine so long as the houses didn't lose value. However, the drop in real-estate values during the Depression pushed a large proportion of interest-only loans into foreclosure. Lenders switched entirely to fully amortizing loans, and that has been the standard mortgage loan since. Find a loan that's
right for you at the
Loan Center
The new breed of IOs differs from those of the '20s in two ways. First, they are not interest-only for their entire life, only for the first five or (more often) 10 years. At the end of that period, the payment is raised to the fully amortizing level. This appears to make them less risky than the IOs of the '20s, but not so. They are more risky.
Limiting the interest-only period to 10 years means little because few borrowers these days hold their mortgages for 10 years. Most will refinance or sell their homes while they are still in the interest-only period.
(Selling quickly for capital gain, and refinancing to "put equity to work," reflects a new mantra: You grow equity through property appreciation, not by paying down your loan balance. The mantra ignores the fact that while mortgage amortization is in the homeowner's control, appreciation is not.)
A risky change: Now they're adjustable, too
But the big change in the risk of IOs, relative to the '20s version, is their attachment to adjustable-rate mortgages, or ARMs. ARMs are risky in themselves because borrowers are exposed to rising mortgage rates when market rates increase. Adding an interest-only feature heightens the risk. When the ARM rate is adjusted sometime in the future, the new payment is calculated using the original loan amount, as opposed to the smaller balance on a fully amortizing ARM.
Consider, for example, an ARM with an interest-only payment option for 10 years and an initial rate of 4%, which resets every six months. In a worst-case scenario, the rate would ratchet up by 2% every six months and reach a maximum of 10% in month 19. The interest-only payment in that month would be 150% higher than the initial payment. The fully amortizing payment, in contrast, would be only 82% higher. |
| Answer by :
DJ B On Date
2007-09-07 17:26:30 |
|
| Interest only loans are risky business. Under typical ecomomic growth conditions the subject property is more likely to appreciate in value thereby opening the gap (equity) between what is owed and what the property is worth. This is critical due to the fact that on interest only your principal balance does not go down unless the borrower understands they must pay extra every month to insure the principal balance is reduced to insure the gain of equity still goes in the right direction. If not, at least until the real estate turns back around (hopefully soon), it is more likely that you will owe more than what the property may be worth. This scenario is not edged in stone, there are areas in the United States that are still appreciating, but at a much lower rate than in the last couple of years. I put a website below that I hope can offer some more information. |
| Answer by :
Etta P On Date
2007-09-07 18:34:38 |
|
|
