Posted on: 24th Oct, 2006 11:53 pm
when you take a mortgage loan, there are various payment options like the 30 year fixed payment, 15 year fixed payment, interest-only payment and the minimum payment option. loans with minimum payment at 1% rate of interest, also known as 1% mortgages are quite popular and can help you benefit financially.
monthly payments on 30 year, 15 year or interest-only loans are quite higher than the 1% home loans. the monthly payment will possible reduce to half its value. most home owners find this offer quite attractive. but to make it effective, one should try to save the extra amount which he need not pay in 1% mortgage.
for example: you refinance your home with a 1% home loan, pay down your credit cards and lower your monthly payment by $1000 each month. if you can save the $1000 instead of giving it away to your creditors, then at the end of 5 years, you will have in total cash worth $60,000 and that too with 0% return.
monthly payments on 30 year, 15 year or interest-only loans are quite higher than the 1% home loans. the monthly payment will possible reduce to half its value. most home owners find this offer quite attractive. but to make it effective, one should try to save the extra amount which he need not pay in 1% mortgage.
for example: you refinance your home with a 1% home loan, pay down your credit cards and lower your monthly payment by $1000 each month. if you can save the $1000 instead of giving it away to your creditors, then at the end of 5 years, you will have in total cash worth $60,000 and that too with 0% return.
1% mortgages are appealing in the sense that they help you to convert home equity into tax deduction. For instance, if your home value increases by $2000 per month, and you follow the 1% minimum payment plan, let's assume that by deferring interest, the principal balance increases by $500. Thus, the equity reduces by an amount worth $500. This extra balance or equity is converted into tax deduction.
If the minimum payment plan is not followed, then all the appreciated value is locked up within the equity and there is no tax deduction. Thus with the 1% mortgage, you can have cash as well as equity unlike the other products which can only build up equity.
If the minimum payment plan is not followed, then all the appreciated value is locked up within the equity and there is no tax deduction. Thus with the 1% mortgage, you can have cash as well as equity unlike the other products which can only build up equity.
If people are concerned with deferred interest, they can follow the bi-weekly payment plan which can reduce the deferred interest and that means the loan balance will not increase.
A person is likely not to benefit from the 1% mortgage loans if the home value in your area goes down rapidly. The deferred interest will not be favorable for you at that time.
Hi,
If the houses in your area appreciate at the rate of 3%-5%, and you are able to save the extra payments which you would have to pay in loans other than 1% mortgage, then the 1% minimum payment option will provide you with good financial prospects.
Thanks,
Sara.
If the houses in your area appreciate at the rate of 3%-5%, and you are able to save the extra payments which you would have to pay in loans other than 1% mortgage, then the 1% minimum payment option will provide you with good financial prospects.
Thanks,
Sara.
There are several ways to benefit from a 1% mortgage and the first is to UNDERSTAND that the 1% is NOT the rate. It is the MINIMUM payment due, the minimum to pay each month that the back will allow and not start foreclosure proceedings.
The second benefit is that it gives you CASH FLOW! If you have the CASH to begin with. Example: monthly income $5000.00 Minimum PYT:$1,200.00 WOW! You have $3,800.00 Disposable income!
It is NOT time to party. It is TIME TO INVEST! Put that money in your IRA or find a good financial planner who will assist you with finding the right avenue to put that money to work you you.
On an average, coservatively speaking, home values will increase at least 2% a year. We are not talking about the HOT value market we've been in the last 3 years. This is 'average'.
Yes the difference of interest rate and minimum payment will be accruing on the back end of the loan. The choice is to pay that interest now, in your mortgage while you are in your high earning years and try to sock away some money when you can. OR do you wait for when you actually sell the house or refinance 10 years from now, when you have your wealth accumulation (cash is KING) in the bank?
As the years go on with this mortgage, you can pay as if it were a 15 year loan or 30 year loan. If you are steadily getting job promotions and income increases then you may choose to pay as if it were a regular 30 year loan.
This loan is to give yourself 'Cash Flow' to do other things, investing wise.
This is not for the faint at heart loan or your vanilla 30 year fixed rate pencil pushing, slide-scale ruler type.
The second benefit is that it gives you CASH FLOW! If you have the CASH to begin with. Example: monthly income $5000.00 Minimum PYT:$1,200.00 WOW! You have $3,800.00 Disposable income!
It is NOT time to party. It is TIME TO INVEST! Put that money in your IRA or find a good financial planner who will assist you with finding the right avenue to put that money to work you you.
On an average, coservatively speaking, home values will increase at least 2% a year. We are not talking about the HOT value market we've been in the last 3 years. This is 'average'.
Yes the difference of interest rate and minimum payment will be accruing on the back end of the loan. The choice is to pay that interest now, in your mortgage while you are in your high earning years and try to sock away some money when you can. OR do you wait for when you actually sell the house or refinance 10 years from now, when you have your wealth accumulation (cash is KING) in the bank?
As the years go on with this mortgage, you can pay as if it were a 15 year loan or 30 year loan. If you are steadily getting job promotions and income increases then you may choose to pay as if it were a regular 30 year loan.
This loan is to give yourself 'Cash Flow' to do other things, investing wise.
This is not for the faint at heart loan or your vanilla 30 year fixed rate pencil pushing, slide-scale ruler type.
Hi Guest,
Thanks for correcting me; Your information has helped enhance my knowledge on the 1% mortgages. And, I hope that the community members will also benefit from the details that you have provided.
Thanks
Thanks for correcting me; Your information has helped enhance my knowledge on the 1% mortgages. And, I hope that the community members will also benefit from the details that you have provided.
Thanks