Post by Admin/YBB on Dec 21, 2020 18:42:26 GMT -6
Consumer Loans 1.0 - Mortgages
CONSUMER LOANS 1.0. Think of loans as investments/savings in reverse, so the same calculators can be used for deposit/mortgage/loan calculations. #Mortgage loans SECURED by the house have rates & may also have POINTS [1%-3% paid upfront]. Each mortgage point [1%] paid upfront may reduce the mortgage interest rate by about 0.10%-0.15%. Points are more likely to be charged when the mortgage market is tight & they obviously discourage quick refinancing [RE-FI]. Most mortgages can be refinanced without penalty. When mortgage rates fall, re-fi go up; when mortgage rates go up, re-fi go down. There are rules of thumbs about when to re-fi, but the best way is to determine how soon the savings from lower mortgage payments would cover the extra mortgage PROCESSING FEES. You may have to pay private mortgage insurance [PMI] if the down payment is less than 20%. Most mortgages have FIXED rates for 15 or 30 years terms, but there are also ADJUSTABLE rate mortgage [ARMs] & BALLOON mortgages [these have low rates and/or payments but the entire balance comes due (balloon) after a few years]. When buying a house, or during the re-fi, or later, you can also get a home equity line of credit [HELOC] that has variable rate, lower term, & possibly a balloon payment; use HELOCs cautiously & wisely as it is secured by your house. Regular mortgage loans are generally NONRECOURSE loans but HELOCS are RECOURSE loans [you are on the hook for the collateral plus any amount due over that]. A future post will discuss other types of consumer loans. #PersonalFinance; 11/26/20 AM.
CONSUMER LOANS 1.0. Think of loans as investments/savings in reverse, so the same calculators can be used for deposit/mortgage/loan calculations. #Mortgage loans SECURED by the house have rates & may also have POINTS [1%-3% paid upfront]. Each mortgage point [1%] paid upfront may reduce the mortgage interest rate by about 0.10%-0.15%. Points are more likely to be charged when the mortgage market is tight & they obviously discourage quick refinancing [RE-FI]. Most mortgages can be refinanced without penalty. When mortgage rates fall, re-fi go up; when mortgage rates go up, re-fi go down. There are rules of thumbs about when to re-fi, but the best way is to determine how soon the savings from lower mortgage payments would cover the extra mortgage PROCESSING FEES. You may have to pay private mortgage insurance [PMI] if the down payment is less than 20%. Most mortgages have FIXED rates for 15 or 30 years terms, but there are also ADJUSTABLE rate mortgage [ARMs] & BALLOON mortgages [these have low rates and/or payments but the entire balance comes due (balloon) after a few years]. When buying a house, or during the re-fi, or later, you can also get a home equity line of credit [HELOC] that has variable rate, lower term, & possibly a balloon payment; use HELOCs cautiously & wisely as it is secured by your house. Regular mortgage loans are generally NONRECOURSE loans but HELOCS are RECOURSE loans [you are on the hook for the collateral plus any amount due over that]. A future post will discuss other types of consumer loans. #PersonalFinance; 11/26/20 AM.