Podcasts about interest only

In this episode we delve into the critical role of finance in real estate investment, discussing the importance of understanding debt, capital deployment, and the various loan structures available to investors. Understanding the distinction between good and bad debt, the implications of interest-only versus principal and interest loans, and the journey from negative to positive cash flow.    You won't want to miss any of the strategies laid out for building a sustainable property portfolio. Learn to navigate the hardest part of investing like a pro and take notes. ‘Cracking the Code on Loan Strategy' episode 254 of the Urban Property Investor.   I discuss -  00:00 - The Importance of Finance in Real Estate Investment 02:53 - Understanding Debt and Capital Deployment 05:47 - Navigating Loan Structures and Strategies 09:03 - The Role of Good Debt vs Bad Debt 11:55 - Interest Only vs Principal and Interest Loans 14:49 - Managing Cash Flow and Investment Strategies 18:11 - Cross-Securitization and Its Implications 21:06 - The Journey from Negative to Positive Cash Flow 23:49 - Building a Sustainable Property Portfolio   Don't hesitate to hit me up on Facebook @SamSaggers. DM me with any of your questions :)   If you're yet to subscribe, be sure to do so on your favourite channel.    Apple - https://pre.fyi/upi-apple   Spotify - ⁣⁣https://pre.fyi/upi-spotify ⁣ YouTube - https://pre.fyi/upi-youtube   And remember, I'm really good on 1.25 or 1.5 speed :)   Take care,  Sam   Hey Investors! It's great to see you here. To get you started on your journey we've popped a few educational resources below for FREE! ➡️ DOWNLOAD The Part Time Property Investor ebook-https://pre.fyi/yt-part-time-investor-ebook ➡️ DOWNLOAD The Property Investor's Cashflow Calculator-  https://pre.fyi/yt-cashflow-calculator  ➡️ REGISTER for a Property Investing Webinar -  https://positivere.events/learn-to-invest    Positive Real Estate's Property Investor Masterclass

Unlock the Secrets to Securing the Best Loans in Today's Market! Whether you are an investor, real estate professional, financial planner, buyer's agent, or investment advisor looking to navigate the complexities of the current lending landscape? Join us for an exclusive webinar that will equip you with the knowledge and tools to secure the best loan products and deals available today. Hosted by: Tim Graham, General Manager of Hotspotting with special guest Lucky Velasquez, CEO of financebetter Webinar Highlights: Shopping for Policy vs. Rates:  Learn how to prioritise policies over just rates to maximise your loan benefits. Understanding General Policies: Get a comprehensive overview of the key policies shaping the lending market. Best P&I and I/O Rates: Discover the most competitive Principal and Interest and Interest Only rates available. Cash Outs: Identify which lenders are currently hesitant and which ones are more flexible with cashouts. Self-Employed & SMSF Loans: Find out the best loan options for self-employed individuals and SMSF's, from major banks to mid-tier lenders. Private Lending: Explore lending options that focus on security rather than income. 100% Lending with Majors: Learn about the opportunities for 100% lending with major banks. To connect with Lucky and his team, please visit www.financebetter.com.au

Got a question for the trio? https://forms.zohopublic.com/propertyplanningaustralia/form/GotaquestionforthePropertyTrio/formperma/zYCQAxzE_24CVlDafP1ozyzwtmB-8m1iCNtCTgDvHXMThis week's episode features a great listener question from Ben."Offset account question I am grappling with. I am nearing retirement and have three investment properties in NE Melbourne, two of which are IO and fully offset. Third is IO and partially offset. I have a PPOR P&I loan with and offset account set up. I continually go round the conundrum of whether to park my funds offset against investment IO loans or the PPOR P&I loan. I fully understand the extra cash flow I get by not paying interest on the IO loans, and effectively have the rent as income (taxable). And offsetting P&I PPOR actually makes no difference to my P&L unless I do something downstream - sell or refinance. Any thoughts?" Cate offers the layman's view on Ben's predicament.Can Ben have his cake and eat it too? Dave would suggest that Ben 100% offsets his home loan first, and then he would target placing his surplus funds into the highest interest rate investment loan offset account. Switching his home loan to Interest Only is another good option. Mike prompts Dave with a question: "What stages of life do you typically see your clients facing this conundrum?" Cate weighs in with some insights based on recent economic and banking changes, relating Ben's conundrum to some of her client's questions. When APRA stepped in, requiring banks to set home loan rates lower than investment rates, things started to change for a few investors. Tune in to hear more...Cate's simple solution hinges around refinancing his home loan to Interest Only, but is it that easy? Dave weighs in with some of the challenges Ben may face. Dave has a technical solution, but it's not easy and will require some intense concentration!Mike ponders; can refinancing the existing debt to reduce the minimum loan repayment commitment help Ben's case? Cate and Dave step through the pro's and cons of the various approaches on option to Ben, highlighting the tax benefits, interest rate differential and long-term benefits. And the Trio shed light on the benefits of offset against Principal and Interest loans....And our gold nuggests! Dave Johnston's gold nugget - If Ben can't refinance and can't go to IO, Dave highlights the important points for Ben to consider. Sometimes going backwards from a cashflow perspective isn't always the worst case scenario. Looking forward, doing the maths and not losing sight of the bigger picture is important.Cate Bakos's gold nugget - Visibility is everything. If Ben has a dashboard and can get a sense of timeframes, he will get a better sense of perspective. His overall portfolio will likely hold him in good stead, but in the meantime he could do a stocktake of his current discretionary spending, and conduct a health check on his current home loans. Mike Mortlock's gold nugget - There is no simple answer, but there are a number of ways that he can do this. Knowing what the banks will allow is important too. Show notes: https://www.propertytrio.com.au/2024/01/08/can-we-retire-at-50-and-how-many-properties-will-we-need-2/

Join Mark Honeybone and his long-time recurring guest, Kris Pedersen of Kris Pedersen Mortgages, for Episode 133 of the NZ Property Podcast as they discuss the new government of New Zealand and other changes that are affecting the lending industry, and therefore home buyers and investors. Along with that, Mark & Kris cover a few other topics in this quite positive podcast, such as: The general 'feel' of the NZ property market. Government changes and the Reserve Bank. Different tiers of lending i.e. Banks & 2nd tier lenders. LVRs (Loan Value Ratios). DTI (Debt to Income). Interest rates. Interest Only loans. What to do now if you have a loan. Happy listening!   To get episodes direct to your device of choice, follow us on iTunes or Spotify. Disclaimer: Property Ventures Real Estate Limited t/a Harcourts Property Ventures is a Licensed Agent under the REAA 2008. The New Zealand Property Podcast does not purport to be comprehensive nor to provide specific advice. Any opinions expressed in this podcast may not match the opinion of Property Ventures Real Estate. No person should act in reliance on any statement made within this podcast without first obtaining professional advice.

Do you find yourself a little overwhelmed because you're about to transition into retirement and you don't really have a great grasp on the financial game plan?Trust me, you're not alone. In this episode, listen as Greg Shepard shares with you a recent encounter he had with someone in that exact situation. You'll hear how Greg stopped this individual in mid-explanation, took a "step back" and simplified things. After Greg was able to share with this individual a simpler, more income producing strategy, he and his wife were able to finally understand the plan and feel less stressed regarding their future. Lastly, Greg shares with you an email he received the day of this recording regarding someone he had been helping deciding to choose the Interest Only option for 100% of their TIAA account. A little unusual, but listen as to why Greg agreed with this strategy - just maybe it could help you out as well with your TIAA account. YouTube Video Channel

Nic McGrue is an experienced attorney who advises clients on negotiating deals. He has seen many people make the mistake of using online templates to create a letter of intent, which may not suit their unique deal or leave out important terms. Nic advises clients to use the Letter of Intent (LOI) to set the big picture terms and then let the lawyers handle the details.

When you're buying an investment property, there's a lot to consider ... Where's the best place to buy ... What's the right property to buy ... What's the right price to pay Plus so much more. But there is one thing so many people fail to consider And instead, they just make a last minute decision, which can often hurt their cash flow. That is, should you go Principal and Interest or Interest Only on your investment property loan? Check out this episode to get the answers Here's a fraction of what you'll discover... Why most investors get this wrong (Hint: it has to do with how we were brought up) What you should never do when you still have a mortgage on your home Think all debt is equal? Wrong! Discover how the Government allows you to benefit from different types of debt Warning: this video might challenge some of your core beliefs But.. It just could help you build a property portfolio more quickly, without stressing your personal cash flow as much (especially right now, when interest rates are rising). To your success, Niro ----- Looking for a blueprint on how to build passive income through property, especially when interest rates are rising? Then get a copy of my book free (both the digital and audio versions) here

- Should I sell my city apartment now it's costing me too much? - Is Melbourne a good long-term investment? - How to I get my property back to Interest Only so I can free up my cashflow?

In this episode, we un the numbers on Principal and Interest vs Interest Only and show the difference between the two. This comes off the back of multiple questions from listeners of the show asking why we recommend interest only mortgages. We go through the return on investment for both instances, and walk through why managing the cash you put into an investment property is so important. Finally, we also mention that you can download the spreadsheet that we talk about on the show, so you can run the numbers for yoursel.

Are Investors driving up the market today? Is now a good time to buy in a hot market, I don't want to over-pay? Should I pay Principal & Interest or Interest Only on my investment property? Send us your questions! alexf@jlf.com.au | jamesf@jlf.com.au

Today's episode of Wealth Coffee Chats is all about Principal and interest or Interest Only?   For more great wealth content and to attend a free Property Investor Night go to https://positiverealestate.com.au/pin/  

Simple math day today, folks. I’ve used this equation MANY times. It gives me a goal to reach for and makes me extremely happy every day I get closer to it. Here’s the premise behind all the numbers, okay?It’s called the 4% rule. This rule has been used as a “rule of thumb” by financial advisors for decades. It basically means this. 1) Pick a number (let’s say $1,000,000 as an example).2) You can take 4% of that number EVERY YEAR as your SALARY, FOREVER (until you die). So, in this example, you could take 4% of $1,000,000 or $40,000 every year, forever, as your salary. The best part of this???The 4% rule is an INTEREST ONLY calculation. So basically it means that you could spend $40,000 a year (in the above example) and NEVER TOUCH THE $1,000,000.So, your kids would get a nice inheritance. Or you can buy a yaht when you turn 90. Whatever floats your boat (get it?)I realize there are caveats to all of this. And yes you actually have to INVEST your money to get a RETURN so that you can retire. But we can talk about all that later. Let’s just say this, if your investments don’t earn you 4% every year on average you are doing something VERY WRONG. I’m up way more than 50% this year and there was COVID, so…NOW TO THE FUN PART. Let’s set your retirement goal!I don’t care if you are 20 years old reading this. Or 99. It’s the same. 1) Step 1 - Calculate how much money you want to spend every month in retirement. This number can vary widely.Some people want to “ball out” and live luxurious high spend lifestyles. Some people just want to sit inside and play chess all day. Because I’ve been BOTH of those people at different times in my life… here’s what I’ll say…If you aren’t working, you will PROBABLY spend more money, because you will be bored. You’ll also have more time to do FUN things and fun things sometimes cost money. WHO KNOWS who you will be in 10 years… so probably better to overestimate.Okay, do you have your number?I’m going to pick $10,000 a month as my number. Seems like you could live a pretty good life on $10,000 a month. 2) Do some easy mathOkay, remember the equation?Now we just gotta work backwards. Honestly there’s probably an easier way to do this. But I’m not a mathematician and I like to see the numbers work in this direction because it makes more sense to me.Let’s start with a million bucks and see what happens. Take $1,000,000 x .04 and then divide that by 12. So, I could spend $3,333 per month forever if I have a million bucks and invest it right. Pretty good, but not the $10,000 I want. Let’s try $3,000,000.Take $3,000,000 x .04 and then divide that by 12. BOOM.10k per month, forever, and I get to give my kids $3,000,000 when I die. Pretty cool huh?Now, for all the haters out there.I realize I didn’t account for inflation. The reason I didn’t do that is because inflation is NOT 2% like your business professor says. It’s much more than that. Read my other articles on bitcoin. I realize that you don’t HAVE to leave all the $3,000,000 or whatever your goal number is, to your kids. You can draw on it and spend even more than just whatever the interest is. For those of you that get what I’m trying to do here.This is about SETTING GOALS and VISUALIZING your HAPPINESS. I know they say that money can’t buy happiness. But it can buy trips to bora bora with your wife. And it can buy you TIME to spend with your dad and mom as they get older…Just saying. Figuring out what YOUR number is FREES you to GET TO WORK. Now, your goal isn’t to “get rich”.That goal sucks. Because the goalposts keep moving and who you compare yourself with keeps changing. That’s how you end up as a fat bald guy stressed out in a red BMW.If you want REAL happiness and FREEDOM, try out this math, and get to work on your business. I promise, having my NUMBER makes getting up everyday WAY MORE FUN.It’s kind of like a video game.Except if you win, you literally never have to work again…Until tomorrow for subscribers and next week for you goofballs who aren’t subscribed…Kale Get on the email list at thekaleletter.substack.com

In this episode, I continue the interview Barry & Gleason Jones of Cross Country Mortgage in Auburn. If you missed the previous episode, you should definitely start there. It is a 2-parter, but you can see the breakdown of topics covered in each episode below...PART 1:Gleason's lessons from being a landlordARM's - are they still out there?How do THEY determine your credit score?Intro to Condo loansImportance of accurate details on loan applicationsHow do you determine if it’s a 2nd home or investment property?How are the loans different for a 2nd home or investment property?PART 2:Interest-Only & Construction LoansHELOC - what are the maximum limits you can borrow?Can you pledge other assets instead of / as a part of your down payment?Approved sources for down payment assistance?Let's talk about seasoningBuying as an LLC vs buying in your personal nameDeeper dive into condosWhere are we in the loan cycle compared to 2-5-10 years ago?A quick look at the reasons for so much development in Downtown AuburnWhat type of loan would you recommend as the best for an investor?Broker’s advice: How do I come into your office and get the best loan? Links from this episode:​​Work with MeMortgage Services: Gleason Jones, Cross Country MortgageUnderstanding Mortgages & the Great Recession: The Big Short (Amazon)​Real Estate Brokerage Services: AuburnInvestmentProperties.comReal Estate Investor Coaching: BetterREI.comWebsites & Branding: EasyLandlordWebsites.com

In this episode, I share an interview Barry & Gleason Jones of Cross Country Mortgage in Auburn. Barry has been in the mortgage business in Auburn for a long time, and his son Gleason is following in his footsteps. Actually, Gleason worked for me one summer, about a year before I sold all of my apartments. He was a hard worker then, and I'm sure he is still a hard worker now. The information and wisdom we get in this episode is hard to beat, so if you want to learn about loans and the mortgage process, I think you'll get a lot out of this conversation. ​It went so long, it ended up being a 2-parter, but you can see the breakdown of topics covered in each episode below...PART 1:Gleason's lessons from being a landlordARM's - are they still out there?How do THEY determine your credit score?Intro to Condo loansImportance of accurate details on loan applicationsHow do you determine if it’s a 2nd home or investment property?How are the loans different for a 2nd home or investment property?PART 2:Interest-Only & Construction LoansHELOC - what are the maximum limits you can borrow?Can you pledge other assets instead of / as a part of your down payment?Approved sources for down payment assistance?Let's talk about seasoningBuying as an LLC vs buying in your personal nameDeeper dive into condosWhere are we in the loan cycle compared to 2-5-10 years ago?A quick look at the reasons for so much development in Downtown AuburnWhat type of loan would you recommend as the best for an investor?Broker’s advice: How do I come into your office and get the best loan?Links from this episode:​​Work with MeMortgage Services: Gleason Jones, Cross Country MortgageUnderstanding Mortgages & the Great Recession: The Big Short (Amazon)​Real Estate Brokerage Services: AuburnInvestmentProperties.comReal Estate Investor Coaching: BetterREI.comWebsites & Branding: EasyLandlordWebsites.com

Kayne is joined by Lisa to discuss what other options there are besides the Mortgage Holiday. We detail Interest Only and extending the mortgage term. Thank you to our series sponsor – Atomic Coffee. These legends fuel us and our guests through our podcasts. If you have any questions or comments, or have a topic you want us to discuss you can contact us at https://moneyempire.co.nz/, or follow us on Facebook https://www.facebook.com/MoneyEmpireNZ/ The advice shared on Beyond the Field is general in nature and does not consider your individual circumstances and is based on our personal opinions. Beyond the Field is for educational purposes only and should not be relied upon to make financial decisions. Kayne Wahlstrom, Isa Nacewa and the Money Empire group are Registered Financial Advisers. We do not provide our clients with advice on investments, nor do we provide investment planning advice. To receive personal financial advice, you must first engage with an AFA or RFA, and receive, read and understand their Scope of Service and Terms of Engagement to ensure the service and products are suited to your needs. We may discuss products, services and answer listener questions on this podcast for illustration purposes only. www.moneyempire.co.nz Triple M Group Limited (5737850) (NZBN: 9429041825877) Registered NZ Limited Company.

This episode is in Vietnamese!Notes[00:02:01] Cty Loan Factory: https://www.loanfactory.com/suong/homeĐịa chỉ của Sương: 10515 Bellaire Boulevard Houston, TX 77072Số điện thoại là: 346-309-6107Email: Suong@loanfactory.com hoặc SuongNguyen85@Gmail.comThư gớp ý có thể gửi về Vee@RealEstateLab.live[00:04:03] Private Lender là một người có dư tiền trong ngân hàng. Cho người khác vay để mua nhà để ở hoặc flip.[00:06:10] Lender trực tiếp cho người mua nhà mượn tiền. Công ty của bạn Sương chỉ là môi giới.[00:08:03] Khi bạn nhận 1099, thì ngân hàng sẽ dùng net income (Gross - expenses) để xét duyệ.Còn khi bạn nhận W2, thì ngân hàng sẽ dùng con số gross income để xét duyệt.[00:10:36] Lien là một văn bản cho phép chủ nợ nắm giữ vật thế chấp (căn nhà) đến khi người mượn nợ thanh toán hết nợ.[00:11:02] Deed of trust là một văn bản thỏa thuận pháp luật mà trong đó, người vay nợ cho phép một người hoặc công ty khác giữ tài sản của người vay nợ cho đến khi món nợ được trả hết.Foreclose là tịch thu tài sản để thế nợ.[00:12:00] Underwriting cho vay dựa theo hai yếu tố chính là khả năng trả nợ (ability to pay) và ước muốn trả nợ (desire to pay).[00:16:26] Sương nhận commision từ việc hướng dẫn bên mượn nợ và bên vay nợ xuyên suốt quá trình cho vay.[00:19:25] Debt to income ratio là tỉ lệ nợ so với mức thu nhập.[00:20:33] Refinance: Tái cấp vốn, tái tạo nợ[00:23:00] Interest Only là khi ta chỉ trả tiền lời mà không trả tiền gốc. Ví dụ ta mượn $100,000 và lãi là 12%. Thì ta sẽ phải trả $1000/tháng cho lender.Full amortized là cách mà ngân hàng thường làm. Đó là chia tiền gốc và lãi ra trong một thời gian dài.[00:24:23] Ở phương diện là lender, thì mình luôn phải nghĩ cho mình trước. Nếu như người mượn trả interest only, thì tiền lời mình nhận được sẽ mãi ở mức cao nhất có thể vì tiền gốc sẽ không bao giờ tụt xuống.Sương ở giữa nên luôn muốn tốt cho đôi bên.[00:30:50] Trung bình nếu down payment là 30% thì lãi xuất trung bình là 8%.Nếu down payment là 40% thì trung bình lãi xuất là 7.5%[00:31:48] Mức đầu tư tối thiểu để dễ làm private lender nhất là tàm $140,000.[00:33:34] Phải có dư tiền mới làm private lender.[00:33:48] Và private lender không cần dùng đến số tiền này trong vòng 5 năm.Số tiền cho vay phải là tiền đang trong một tài khoản ngân hàng.Support this show http://supporter.acast.com/the-real-estate-lab. Our GDPR privacy policy was updated on August 8, 2022. Visit acast.com/privacy for more information.

Gość - Wojciech Symonowicz

Most investors and some homeowners have interest only loans. However, the option to repay interest only doesn’t last forever. Most mortgages have a term of 30 years. Typically, the first 5 years is interest only. After that term has expired, repayments automatically convert to principal plus interest.If you have an interest only loan that is approaching the maturity of its term, what are your options?The government forced banks to curb interest only loansThe volume of interest only mortgages peaked in early 2017 when they accounted for approximately 40% of all new mortgages. The government (APRA) then stepped in and introduced a new benchmark which stipulated that the proportion of new interest only loans provided by banks must be less than 30% of all new loans. Most banks achieved this target by mid-2018 and currently only 20% of all new loans are structured with interest only repayments. As such, APRA subsequently removed this benchmark in December 2018.The banks dissuaded borrowers away from interest only loans by doing four things:1. They increased variable interest rates. Until recently, variable interest rates for interest only loans were 0.42% higher than their principal and interest counterparts. That gap has only recently reduced to 0.34% because most of the banks passed the full 0.25% October RBA rate cut. I predict that this cap will continue to reduce over time.2. Banks made it more difficult to roll-over to a new interest only term by requiring borrowers to go through a full application process.3. Almost all banks reduced the maximum interest only term to 5 years. Previously banks would offer interest only terms of up to 10 years – and a few banks even offered 15 years.4. Lenders tightened credit parameters e.g. they have become very reluctant to allow interest only repayments for owner-occupier loans.The banks are starting to loosen up on interest onlyOver the past few months, we have noticed that some lenders have marginally loosened credit policies in respect to interest only loans. Some lenders no longer require borrowers to go through a full application process if they request a second interest only term. Also, some banks will now offer interest only terms of up to 10 years to investors only.Do interest only loans still make sense?Interest only loans increase your flexibility. Whilst the minimum payment is limited to just the interest, it does not mean that you are not allowed to make principal repayments. In fact, you can make principal repayments at any time. Better still, attach an offset account to your mortgage and your cash savings will reduce the interest cost too.Investors are particularly attracted to interest only loans for two primary reasons. Firstly, if they have a (non-tax-deductible) home loan, they can direct all their cash flow towards repaying it first, before they repay any investment debt. Secondly, it reduces the monthly cash flow cost of their investment. This means that have more cash to invest in other assets (or service higher levels of borrowings).The additional benefit of an interest only loan is that your monthly repayment amount is directly linked to your net balance. Therefore, if you have repaid a portion of your loan principal or have monies in offset, your repayment will reduce accordingly. However, the dollar value of principal and interest loan repayments are fixed as they are calculated using the loan amount, not the actual balance. Most people prefer the flexibility that interest only loans provide.So, are you suggesting that we never repay an investment loan?No, not necessarily. Of course, you must consider debt repayment/management when formulating your investment strategy as I have discussed here.One factor you might like to consider is that inflation will naturally eat away at your loan balance over time. Most people would consider a $1 million mortgage as a big loan. However, based on inflation data, a $1 million loan is equivalent to a $205,000 loan 40 years ago (in the late 70’s, $205,000 was a lot of money!). So, a $1 million loan in 40 years probably won’t seem as a big a deal as it does today.Now, I’m not saying this to suggest you don’t need to worry about debt levels. Of course, you must be prudent with debt exposure. But my point is that inflation expectations is a component of the loan’s interest rate (high inflation equals high interest rates). This means you are essentially paying for the “inflation” cost each year and the real value of your debt is therefore reducing.If your interest only term has expired, what are your options?You typically have three options.(1) Rollover onto another interest only termWe can ask your bank to roll your loan over onto another interest only term. Typically, this is possible as long as your loan was established less than 10 years ago. If your loan is more than 10 years old, it is unlikely the bank will allow another interest only term.(2) Refinance your loan to a new lenderIf your current lender is not willing to offer another interest only term, we can refinance your loans with another lender. Of course, this will require you to go through an application process, which is quite an arduous and time-consuming task these days. If you have not done this for many years, you will need to consider whether you are able to satisfy currently tight credit criteria – see here.(3) Start repaying principal and interestYou could do nothing and let the loan’s repayments convert to principal and interest. One of the advantages of the current low interest rate environment is that principal and interest repayments are relatively low.For example, on a $500,000 loan, principal and interest repayments would be approximately $2,640 per month. Interest only repayments would be approximately 30 per cent lower at $1,875 per month. However, only 5 years ago, interest rates were circa 6% and as such, interest only repayments would have been approximately $2,500 per month. Therefore, the reduction in rates over the past 5 years has absorbed much of the cash flow impact of principal and interest repayments. That said, you must consider whether principal and interest repayments are still affordable when interest rates do eventually rise.Avoid expiry with a line of creditA line of credit (LOC) is a type of mortgage product that does not have a loan term. As such, it does not have interest only period i.e. principal and interest repayments are never required. However, interest rates for LOC’s are around 0.50-0.70% p.a. higher than standard interest only investment loans.Debt repayment is less attractive whilst rates are lowOne consequence of a low interest rate environment is that debt repayment is not as attractive as it once was. If your investment loan’s interest rate is 4% p.a. today, the after-tax cost of that debt is probably less than 2.5% p.a. So, by repaying debt, that is all you are saving (2.5% p.a.)! I would suggest that your money could be invested elsewhere, and it wouldn’t be difficult to earn an after-tax return well in excess of 2.5% p.a. Of course, interest rates will eventually rise so the long-term benefits of debt reduction will still be present. However, today, the opportunity cost is higher than usual.Please reach out to us if you need helpOf course, we are ready to help should you need it. If you have interest only terms that are coming up for maturity, we would welcome the opportunity to help you find a satisfactory resolution. Click here to find out more.

  Keith Baker gets down on the basics of private loans. The three rudimentary loan concepts upon which creative lending and private lending are built are the interest-only loan, the amortized loan, the balloon payment. Learn more about these types of payments as Keith dives into each one, and prepare to get your tickets to the Quest Trust Company Self-Directed IRA Expo in Houston this August 23rd through the 25th, 2019. You can go get a 25% discount off of those tickets at http://privatelenderpodcast.com/ (PrivateLenderPodcast.com)./Expo by using the promo code “PLPodcast.” — Listen to the podcast here: Interest Only, Amortization, And Balloons The Basics Of Loans – Part 1 I’ll be talking about the three basic or rudimentary concepts of promissory notes, lending money and structuring loans. The beauty of private lending is that you can be very creative in the way that you construct a note. I consider these productivity building blocks for the private loan that we’re going to talk about. It’s basic math accounting stuff, but I figured that I get enough questions from time to time at REIAs that it’s worth addressing. First, time is running out to get your tickets to the Quest Trust Company Self-Directed IRA Expo in Houston this August 23rd through the 25th, 2019. You can get a 25% discount off of those tickets at http://www.privatelenderpodcast.com/expo (PrivateLenderPodcast.com/expo). Use promo code PLPodcast. I also want to tell you that the Private Lender Podcast is teamed up with https://www.questtrustcompany.com/ (Quest Trust Company) and we’re going to coordinate a happy hour/meetup at The Axis Lounge in the Royal Sonesta Galleria the evening of August 22nd, 2019. That’s when after all the vendors are finished setting up, there will be vendors, speakers, sponsors of the expo. There will be attendees, VIP, general admission attendees. This is going to be a pretty dense group of people. The Quest Expo draws in people from all over the US. Because of that, we decided we’re not going to get sponsors and have email lists and chicken wings and pizza. We were trying to minimize the tire kicking and if you want to come and hobnob with these people, you don’t have to pay. You can just come on out. The food and drink will not be free. You can go to my https://www.facebook.com/PrivateLenderPodcast/ (Facebook) page for more information. I highly recommend that you come out. Let’s go ahead and get down to the brass tacks in our topic, which is the three rudimentary loan concepts upon which creative lending and private lending is built. These are quite simply the interest-only loan, my favorite. There’s amortization or the amortized loan, and as our trusty old friend, the balloon payment. I’m a big fan of the balloon payment. It’s a nice trigger for default in case you've got to get your money back through the property. It can be quite useful and you don’t see it too much on residential, but you do see a lot of balloon payments in a commercial. Let me dive into number one, and that’s the interest-only loan. There’s a supplement to this. I have an https://www.dropbox.com/s/q05v0dj4qasrowc/Episode%2081%20Amort%20Schedule.xlsx?dl=0 (amortization schedule). It’s a basic investor-friendly amortization schedule and it has an option for interest-only. You just get your monthly payment. With the interest-only loan, you don't have to worry about how much is going to principal and how much has gone to interest.https://twitter.com/intent/tweet?url=http://privatelenderpodcast.com/plp-081/&text=With%20the%20interest-only%20loan%2C%20you%20don%27t%20have%20to%20worry%20about%20how%20much%20is%20going%20to%20principal%20and%20how%20much%20has%20gone%20to%20interest.&related (Click To Tweet) The beautiful thing about an interest-only payment is if you loan somebody, say $100,000 at 12% for a year, then...

One of WA's top mortgage brokers, Sam Carrello of Napoleon Finance, steps into the studio for the first time to explore the latest changes to assessment rate policy from APRA, and how this ties in with the relaxing of Interest Only and Investment lending caps.  We then put a spotlight on Bedford and chat with the #1 agent, Natalie Hoye, about the Beaufort St up-and-comer.

1. The housing market in Sydney & Melbourne grew 60-70% between 2012-17 due to lots of Interest Only lending (were they irresponsible at first?) 2. Are Australians Debt hungry? Are we more Spenders than savers? 3. Is Property Investing going to create wealth for individuals? (there are people that lose in property)

1. Loan numbers slowing down - NSW down 20%, and Investing at all time lows of 26% of overall lending 2. Speed of loans slowing down sufficiently (why when they are writing less loans??) 3. Interest Only loans were 60% of the market, now 19%

Our finance guru, Arin Di Camilo, MD of Surrey Road Finance, joins host Trent Fleskens to discuss the ever-changing rates environment, and in particular Interest Only vs Principal & Interest loans. Michael Sammut of Sammut Rosh & Associates then joined the conversation to run a fine tooth comb over his suburb, Beechboro.

Interest Only vs Principal and Interest loans can have a huge impact on your cash flow and can mean the difference between a property paying for itself and then some and you having to find money to keep the property afloat. Resources Related To This Episode Property Tools On Property Membership Treat Property Investing Like […] The post How Interest Only vs Principal and Interest Affects Your Cash Flow appeared first on On Property.

Welcome to finance and fury, the Say What Wednesday editions! Today’s question comes from Dale: “My question refers to a point you and Jayden made a few times about recycling debt or using good, specifically using equity to purchase shares. I understand that you can claim the interest paid on the equity as a tax deduction. So, does that mean you have a second loan to pay down? And also, how does it look at the backend when you want to liquidate your shares? Great questions! Today we will run through each one of these covering off on Leverage. Leverage is when you borrow to invest money, and why do this? Well, is $100,000 more than $50,000? Agree or not? It is! And that is what leverage does. Borrowing fund to invest into something to increase the value of the investment. And it works off getting percent returns, where the greater the value of something, the greater your real return in dollar figures off the exact same percent when compared to a smaller investment. We are all really locked into the same return the ASX can give. If you put money into the ASX300, everyone invested in the ASX300 gets the same return. However, those with more money in it will get more of a dollar value of a return. That’s the whole “Rich getting Richer” saying, where the same percent increase off a greater value will lead to a greater return. Now on to good debt. As Dale said, if you can claim the interest against the debt, it is generally considered good. And to make it eligible to do that it needs to be invested in an income providing asset. More importantly though, good debt is debt that is being used towards something that will actually go up in value. If it is on a personal loan or something that will actually go down in value, that is what it is bad debt with credit cards or personal loans. Plus, no deductions. But for good debt, if you take out $100,000 to invest in shares, the shares should increase in value while the debt shouldn’t. It shouldn’t go up with inflation, so using leverage can help to increase your overall wealth when your starting values are relatively smaller than what you would like. As a warning, when borrowing funds to invest both your positive and negative returns are magnified. This is general information only! But how borrowing-to-invest works in this case is from what is called home equity, where you borrow money out of your home to buy shares or managed funds. Equity it just money you have in the value of your home. If you have a $1m home, you can borrow up to 80% of that value. So, if you don’t have any debt against your property and it’s worth $1m, you technically have equity in that property of $800k which you can borrow to utilise to invest. And even though it is your own personal residence, because you are borrowing funds to invest in something that produces and income, then that will actually become a tax-deductible expense with the interest payments. As opposed to if you took money out to buy a second holiday home. And any investment that you invest in that produces an income, you can claim deductions against it. Either for the cost of the investment (management fee of the platform you are invested on) or the interest that you have to repay on the borrowed amount. Now, the process of borrowing money against the home going back to Dale’s question. You do need generally to get a separate loan if you have bad debt attached to your home. So, if you have a home, again $1m, and there is a $500k mortgage on it, that 500k mortgage is your bad debt. But then you can create a separate loan (or second loan) and borrow money on that. The reason why you have to take out a separate loan is to keep track of the interest components of repayments. Because if you have one loan that is principal and interest that is bad debt, and you take out more money on top of that and invest those funds, it is going to be very hard on a month to month basis (especially if the rate is variable), to work out what component is interest of the repayments towards the investment and your mortgage. Mainly, accountants require a second loan and the ATO requires a second loan to actually make sure the interest being claimed is 100% accurate. And with the separate loan, it does mean that you have to pay it down……if you choose. But you have time! Like all loan you can take an additional 30-year loan on a separate facility on your home. But if you do want to pay it back, then yes, you over time will have to repay it. And the deductible interest you claim that at tax time. The way that works is during the year you earn your income, then when you lodge your tax returns you’ll list on there income earned from investments and personally, and the interest you have paid on those investments to offset the income. Why it’s great to have a separate loan as well, is that you can structure it differently to your bad debt. And one of the best waits to structure investment loans may be on Interest Only payments rather than Principal and Interest, because if you are on a Principal and Interest payments half or sometimes majority if it is a new loan it will be paying off principal which is not deductible. And over time, maybe after 15 years, the majority of your repayments start to become principal with little interest. So, you’ll be paying the same amount on the property, but how much you can claim as interest on that isn’t actually going up, its going down over time. The other thing is flexibility, having an offset account on there against that loan allows you to have a separate offset account which is your cash fund for investment purposes. And unlike margin loans, the home is the collateral for the investment. Therefore, the investments can be independent form the collateral. If you get a margin loan you need to get a loan on every share that you get, in this case you are just borrowing money against the home which is collateral itself, then investing that in really any investment. So, the loan isn’t attached to the investments itself you are making. And that works a lot better as it is safer than a margin loan where you can hold the investments if they go down in value, indefinitely. With a margin loan, if the investment goes down in value but your loan doesn’t decrease the bank will step in. Remember that you loan stays the same as when the investments go up, but you loan stays the same also when your investments go down, even below what the loan is.   So in a case where you have a margin loan and the value of the investment goes down, when the value of the investments is below the loan the banks going to tell you need to buy more of the investment, sell investment to repay loan or repay loan using your cash. That is actually a greater risk, because you are forced into a situation where it might not be the right investment to buy, as it is going down! Or you have to sell an investment and crystallise the loss. The second benefit with home equity compared to margin loan is the lower rate. Again, a home is a much less risky collateral for the banks to have, than a share which is much more volatile. So that is the initial proceeds, you borrow money against the home with a separate loan with an offset account generally attached to that separate loan, then you invest the funds. You take money out of that loan and invest the funds. This can be in any asset as long as it produces an income. It should be in certain types of assets to not introduce additional risks, you wouldn’t just borrow $100k and put that into one bank or mining share. The ongoing strategy from there, you can either keep borrowing money as the value of the property increases, you can keep the loan the say, or you can start paying it down. And that is where over time you can choose to do really whatever you want with that loan! And that takes us back to Dale’s question again. If you want to repay the loan at some point, you can do it early, or can wait until the 30 years is up. Either way it will take a bit of planning to do, as if you want to repay the loan without selling the investments, you have to plan ahead and utilise the investment income, to use this surplus income plus your cashflow to use this to repay your debt down quicker. But a bit of a better strategy, if you are looking at repaying debt, pay down your bad debt first. So, use your investment income to pay down your personal mortgage, as that is not deductible. And it isn’t borrowed funds against an investment asset! Therefore, you can over time try to pay down bad debt, and then figure out what to do with the good debt. With the good debt, that should be the last one to pay down if you have bad debt, but if you plan properly over time you can work out over time how much in repayments it will take to pay this down by the time you need to. And the other option is to sell the investments. So, as far as liquidating the shares go, you can do that at any point as well. You don’t have to sell all of the investments, you can just select one investments in the portfolio that does have a large capital value increase to pay out the loan. Because when you sell that investment you will pay capital gains tax on this. And that won’t actually be reduced by the loan in any way. As it is only the ongoing interest payments that you can claim a deduction against. It’s not like you’ve invested funds that are borrowed and what’s invested goes up, that you somehow get a reduced tax on the capital gains tax. It works the exact same as if you bought the investment with your personal cash rather than borrow funds. So, those are the options, but it is probably better to plan over time to pay the loan down. But because it is an equity loan that is against a home, and the home is the collateral for the investments (and not themselves). That is why the investments are independent and you can choose that to do what you want with them over time. So, they are unrelated unlike with a margin loan it is attached to the individual share, so if you want to repay that again, you got to pay the bank back their money or in that case sell the investment. But here, there is more flexibility. So, you can choose to do whatever you want when it comes to when to repay the loan and how to repay it. You can also choose over time to increase the loan as the property value increases, keep the loan the same or choose to pay it back. The last thing is if you choose to sell the property that the loan is attached to. If you have equity borrowed against the property and you sell it, the investments don’t have to be sold, they can stay in place. It just means that when you get the proceeds (or equity) out of the remaining money in the property once it is sold, you will just have less to put towards the next property to buy. If you have a $1m property with no debt, you get $1m of proceeds. If you have a $1m property with $800,000 of debt, then you will get $200,000. I hope that covers everything. The questions were just relating to understanding that claiming the interest as a tax deduction, but does that mean you have to pay down a second loan? So, you do, you borrow a second loan, you don’t have to pay it down on Principal and Interest, you can pay it on Interest Only and transfer savings into an offset account, which technically means you aren’t paying the loan back but still reducing your interest. But at some point, the bank will want their money back. When it comes to winding the investments up at the back end, do you liquidate your share? Well you can but it is probably better not to. Thank you for the question Dale, I’ll do a more detailed episode on this in episode 6, covering off how the rich really get rich! But if anyone has equations, go to financeandfury.com.au/contact and hit us up with something like Dale’s question, or Adam’s last week. I hope you enjoyed it!  

Welcome to Episode 5 - yes! 5 - of the LM Experience!  This time, Stuart & Martin are talking about Interest Only mortgages - the changes that have been seen in the marketplace since 2008, and the future for their availability to mortgage borrowers. We welcome your feedback - please like, share and subscribe - you can find us on Twitter - @TheLMExperience

Today, we are going to hear a cautionary perspective on the current state of commercial real estate, particularly in the multi-family sector. Our guest is Jack Ehrman, who is the co-founder of Post Investment Group. Jack is wicked smart, knowledgeable, and extremely cautious about buying in today's market. In fact, he says that his real estate firm basically isn't buying real estate at this point.   Here are some of the topics we discuss... - What is the current state of the lending market and why is debt so important at this stage of the cycle? - How DSCRs, LTVs, and Interest-Only should be manipulated in order to achieve the optimal capital stack for a CRE deal given the current market conditions. - When you are underwriting deals, should you be more focused on the downside protection, rather than the downside protection? I guarantee you will hear a perspective that isn't frequently discussed in the real estate podcast sector, but it is important to be cautious right now for a variety of reasons.   Click here to access our investment opportunities: https://cashflowconnections.com/accredited-investor-questionnaire/ Subscribe in iTunes: https://itunes.apple.com/us/podcast/cash-flow-connections-real-estate-podcast/id1193877994?mt=2

A manic day of interviews after the new FCA (Financial Control Authority) warned that up to 1m people on Interest-Only mortgage deals had no plan in place to pay off the capital sum. Is this a ticking time-bomb for the housing market?

Taylor Hays Taylor.Hays@migonline.com Office 865-671-8910 Fax 865-671-0774 10118 Parkside Drive, Suite 100, Knoxville, TN 37922 NMLS Unique Identifier # 922459 TN Lic. # 113544 Message from Talyor: Mortgage Investors Group is Tennessee's leading independent mortgage lender. By choosing from our large selection of loan programs including Conventional, FHA, THDA, VA, Construction/Permanent, Interest Only, Fixed and Adjustable Rate Mortgages, you can be certain that you will receive the mortgage program that best fits your individual situation. We have in-house technology systems and experienced staff to simplify the mortgage loan process, thus saving time and money for borrowers. In fact at Mortgage Investors Group, we guarantee that your rate and our fees will not change from lock-in to closing, or we will pay the difference. We specialize in providing convenience, ease, and experience along with low mortgage loan rates. "My team's commitment to providing superior customer service has afforded us a quality reputation in the community. I look forward to assisting you with any of your current or future mortgage loan needs. As I work primarily by referral, I encourage you to tell family, friends, and colleagues about Mortgage Investors Group and me." 2nd Segment: Robert Carter: Robert.Carter@migonline.com Office 865-691-8910 Fax 865-691-7714 8320 East Walker Springs Lane, Suite 200, Knoxville, TN 37923 NMLS Unique Identifier # 898005 TN Lic. # 113697 Message From Robert: Working for Tennessee's Leading Independent Lender allows me the tools that the competition simply does not have. That is why shortly after Mortgage Investors Group financed my home, I joined the team as an employee. I understand that purchasing your home is likely the largest purchase you will make in your lifetime, and I take the responsibility of guiding my clients through the process seriously. It is my job to find the best loan product for each client's individual needs and explain every step required to get you into your new property so that you can continue living your life. I would be honored to show you why the Carter Team is such a powerhouse in the mortgage lending business. Our closing process is a well-oiled efficient machine that works for you. Unlike other Loan Officers at other companies that can be hard to get in touch with, and forget about the client after the closing, my team is here for you when you need us and understand that you will have questions after you move in. Come Close with Carter, and see why previous clients say such great things about us! 3rd Segment: Ron Daughtrey: Ron.Daughtrey@migonline.com Office 865-691-8910 Cell 865-209-3883 Fax 865-691-7714 8320 East Walker Springs Lane, Suite 200, Knoxville,TN 37923 NMLS Unique Identifier # 113067 TN Lic. # 88274 Message from Ron: Mortgage Investors Group, founded by loan officers, is Tennessee's leading independent mortgage lender. Whether you're buying a home or refinancing your current one, I am committed to helping you find the mortgage program that best fits your individual situation. MIG offers competitive loan rates and a large selection of loan programs, including Conventional, FHA, THDA, VA and USDA. We use on-site Underwriting, Processing and Appraisal services and in-house technology to ensure a swift and professional lending experience. As a licensed Loan Officer, I have the expertise to advise you through the process, answer any questions you may have and help you close on time. You can rest assured that you will receive superior customer service when you work with MIG. That's how we've become leaders in the local mortgage lending market. I look forward to assisting you with your current or future mortgage loan needs. I hope to hear from you soon.

Following Vikram Pandit’s surprise resignation from Citigroup, the banking team analyses events leading up to the chief executive’s departure and whether his replacement, Mike Corbat, is what the troubled group needs. Also under discussion are plans by Lloyds to reform its remuneration structure by ditching annual bonuses, as the bank attempts to appease the government, shareholders and the public. See acast.com/privacy for privacy and opt-out information.

This week the team is joined by Elaine Moore, deputy personal finance editor, to discuss Nationwide Building Society’s decision to stop offering interest-only mortgages to new borrowers. Also, what is the significance of plans by James Gorman, Morgan Stanley’s chief executive, to sacrifice staff and reduce bonuses, and how has the banking sector reacted to recommendations of the Liikanen report? See acast.com/privacy for privacy and opt-out information.

The Money Show investigates whether share prices are rising on sentiment or sound fundamentals. Also, will reform of the advice market actually mean you pay more and your adviser gets paid in the same old way? And banks impose stricter rules for interest-only mortgages See acast.com/privacy for privacy and opt-out information.

Trapped in an overseas holiday home - why Brits who bought in Europe and Dubai face massive losses. Catch them while you can - fixed rate bonds paying up to 5 per cent are disappearing fast. And endowment mortgages are back, as lenders crack down on interest-only deals See acast.com/privacy for privacy and opt-out information.

Live chat with Lori & "G-II"If the chat window does not open,hold down the control key thenclick the Chat Icon above.Ok... school is in... LOLThe first thing I want to say is that for some folks, using their VA benefits is a good thing and for some folks, using their VA benefits is not only NOT fiscally prudent; it could even be financially irresponsible. Over the past 15 months, Lori and I have closed well over 75 transactions of our own and mentored and have been involved in another 60 transactions with protégés. Of that number, perhaps as many as 2/5th were veterans, active duty or retired or simply discharged from their particular branch of service. Of that 2/5th, less than a dozen or so used their VA benefits. The cost of money today is so inexpensive that there is little reason and almost NO advantage to a vet to use his or her VA benefit. There are numerous optional loan platforms that emulate the benefits of a VA loan without causing the buyer to toss away thousands of dollars in a VA funding fee.Suffice for now to say that Lori & I have been in this industry nearly two decades. The VA loan platform is one that we are extremely proficient with and since I too am retired USAF, we tend to draw a huge number of vets to our web site who ultimately secure our services to procure their home, help with arranging home inspections, termite inspections and... oh yes... sorting out what type of loan makes the best sense for that particular eClient.So, Let's Chat...QUESTION: There are a million mortgage calculators online, and they all differ from one another. The simplest ones just ask for the amount of the loan, any down-payment, and number of years. However, there are some that have blanks that require specific information such as Tax Rate and Insurance. I have no idea what to plug in, for those items. Can you help me with this?Correct; there are literally millions of mortgage calculators on the internet today. Quite frankly, over the years, Lori & I have played with hundreds of them, searching for what we feel are some of the best and least confusing. We have found that nearly all of the mortgage calculators, found on lender sites, are very confusing. Some, quite honestly, are actually weighted so that eConsumers conclude that the Lender who provided a particular mortgage calculator, appears to offer the best mortgage deal on the Internet or even the planet. In our opinion, this is unfortunate and very confusing and can tend to be a bit misleading.As for how to divine what figures to use for Tax Rate and Insurance, let’s first discuss Tax Rate. Here’s a good rule of thumb we have arrived at after reading hundreds, perhaps thousands of Arizona Public Reports; if you use a figure of somewhere between $10.00 and $13.00 per $100 of property value (not purchase price), you will come really close to the actual tax rate. Property values, as we discuss in this article can be researched at http://www.maricopa.gov/Assessor/. Tax Rate calculations are extremely complex computations. If you would like to know more about how a municipality actually establishes the tax rate, call the county recorder in the county you wish to live and ask to speak to a clerk of the County Tax Assessor’s office. They are very happy to educate the consumers with the math… but… make sure that, if you have a full head of hair when you begin, you’re not going to be disappointed if some if it is missing after the tax rate calculation class concludes. Insurance is a bit trickier, only because there are several variables that play into the actual insurance rate a buyer will be charged. Two of the most important variables are derived from the C.L.U.E. (Comprehensive Loss Underwriters Exchange). C.L.U.E. is a database that all insurance companies use to assess the risk factor for insuring a particular piece of real or personal property based on both the real or personal property and the individual wishing to be insured. The first assessment is conducted around the real or personal property. The next assessment is conducted around the credit score of the individual and the individual’s history of filing insurance claims. The C.L.U.E. retains a five year history for the majority of all insured individuals and their widgets. Learn more about C.L.U.E. at http://www.choicetrust.com/. Many factors play a vital roll in providing the information insurance companies require to tender a firm-fixed quote for a homeowner's insurance policy. Even in the early quotes, the figures are truly speculative numbers and could vary a few hundred dollars up or down in the final analysis, and the final analysis can only be determined once you have settled on a particular home in a particular geographic area and on a particular price and on a particular amount to finance.Back to mortgage calculators; Lori & I actually favor mortgage calculators that have been put up on the web by college students. These are truly unbiased mortgage calculators that offer honest unbiased results. Some are very complex and some are very simple. In the following paragraphs we have provided links to three of our favorites, one of which we keep on our web site in a secure location, offered to eClients that have selected us as their Realtor Representatives. They were all developed by college students, one in Japan, the other in Pakistan.QUESTION: Some calculators have fields for loan components called “points”. What the heck are these things, and do I need to worry about them? POINTS – Perhaps lead the pack of some of the most confusing parts of the loan package. So what is this thing called “points”? Points are often confused with “origination fees”. The two serve completely different rolls in the loan process.An “origination fee” is an amount of money, charged by a mortgage company, to the buyer as part of the lender’s cost of doing business. However… what most consumers do not know is that the “origination fee” is a totally negotiable charge, assuming the buyer has relatively good credit. It has been our experience that buyers with FICO scores in the high 600s or higher can usually shop, with great success, for lenders who will charge minimal or NO origination fee in their loan process. Our suggestion would be to stand your ground. Assuming that all of the other terms of the proposed loan are acceptable, make it clear to the loan officer, that if he/she does not alter their costs of the “origination fee” you will simply take your business elsewhere. If you are currently searching for a couple of lenders, check out Coldwell Banker Mortgage, Rosemarie Cox (602) 565-6948 and/or Pacific Funding Group, Mark Schmidt (800) 245-6722.Points, often called Discount Points, are the amount of money a buyer will pay to control the interest rate on his mortgage. The “point” is calculated against the amount of money that will be financed, I.E. your mortgage amount. So, if you’re going to make a purchase of $350,000 with a 20% down payment, your mortgage amount will be $280,000. Therefore one point (1%) would be calculated to be $2,800. There are numerous formulas bandied about on the Internet about how these fees benefit or hinder a borrower’s loan. In short, if you spend one point of your loan amount, you can affect your interest rate by about 1/8th of a percent.This means, if the consumer is quoted an annual interest rate of say... 6.5% but wants to reduce that rate (I.E. buy it down) to 6.0% by paying money at the time of closing to do so, the consumer would have to part with about $11,000. For some buyers this is a good idea, particularly if they are going to stay in their home or not refinance the home for many years. But keep in mind too, that another barometer to making such a decision is how long it will take to recapture the $11,000. By reducing the annual interest rate by 1/2 a percent, the payment reduction on a $280,000 loan is about $90 per month. That means that it will take about 10.18 years to recapture the interest savings. Not a bad scenario, and often a $90 reduction in the monthly payment can mean adding a little more tile in the house, or the cost of some appliances or any number of additional accoutrements or creature features that the buyer may want to add to the loan.Here are a few thumbnail guidelines to help you decide if the return on this type of investment is warranted.It may not be wise to spend money on Discount Points if:you plan on selling your home in less than 3 to 4 yearsyou plan on refinancing your home in less than 5 yearsyou are applying for an ARM type mortgageyou are applying for an Interest Only loan productIt may be wise to spend money on Discount Points if:you do not plan on selling your home in the next 5 yearsyou do not plan on refinancing within the next 5 yearsyour purchase is for investment and/or rental purposesThese are suggestions and not items to be thought of as “Set in stone”, but they are a good sound foundation for developing your loan strategy.CLICK HERE for a very simple mortgage calculator, just plug in the numbers. Be sure to enter NO commas. The interest rate will accept a dot, for example 6.5 but do not include a % sign. This is by far one of the simplest mortgage calculators we have found and is GREAT for calculating VA loans because it does not automatically include MIP (Mortgage Insurance Premium). This calculator does not produce an amortization schedule but the next mortgage calculator does.CLICK HERE to use a more sophisticated mortgage calculator. Again, only use numbers and no commas and too, the interest rate can be calculated using a decimal point in the rate, but again... DO NOT use the % sign. This calculator can produce an amortization that can be produced in HTML or Plain Text. In the " Monthly Principal Prepayment Amount " window, DO NOT enter any values and the same is true for the " Annual Principal Prepayment Amount (Enter B here for Bi-weekly Loans) " and " One-Time Prepayment Amount, to be paid before payment (month #) ".CLICK HERE for an interesting mortgage calculator created by Hugh Chou. This is a mortgage calculator that compiles a maximum monthly payment that Hugh feels is appropriate for a home buyer. Keep in mind that Hugh built these calculators as a college project although now I believe he works in the financial industry.There are many factors to consider when searching for a home loan, not only the total monthly payment, but also total loan costs. You asked about "Points". As we mentioned, this can be a confusing term. Often consumers believe that there MUST be points associated with ALL loans. As we explained above, that could not be further from the truth.When considering a new construction home, remember, that in almost 100% of loans that are configured by a builder's lender, the builder's lender will add... at a minimum 1% to the loan cost (sometimes, incorrectly, referred to as a POINT). This fee is really an "Origination Fee". In our opinion, consumers with GREAT credit scores, also referred to as the "FICO" (Fair, Isaac and Company Inc) score, should not be subjected to these fees. Unfortunately, when builders offer incentive packages to the consumer, those incentive packages are tied directly to the requirement that the consumer utilize the builder's lender to secure financing for the purchase.It would be sensible to consider not using the Builder’s Lender if the total incentive package hovers around the $5,000 mark. Some of our clients have had a GREAT deal of success using non-builder lenders, wherein our clients have given up as much as $5,000 in incentives from the builder and... even after doing so, have secured a much more favorable loan program and sometimes even lower monthly payments, with similar or lower closing costs, than they would have if they had used the builder's lender.Another typical lender explanation for an Origination Point is: "An origination fee is the amount charged for services performed for handling the initial application and processing of the loan". Hog wash! While it is true that some loans should be burdened with such a fee, such as loans granted to buyers with less than perfect credit. The amount of effort and research that goes into locating an investor who is willing to purchase the loan from the lender can be intense. In our opinion, level of effort and perhaps even ‘arm twisting’ should be compensated. But if the consumer/borrower has a good to great FICO score, again in our opinion, there should be NO Origination Point... NONE... NADA... ZIP... ZILCH... got the picture? Why should a lender, granting a loan to a buyer with good to great credit, make profits on two transactions? The first transaction is between you and the lender. The next/second transaction for the lender is between the lender and his investor, the entity who will purchase the loan from the lender. Remember, if you keep your credit in good condition, you have a boat load of strength and negotiating power as you shop for your loan.Another item to pay attention to are the ever swampy quagmire of Lender Fees... Ok... I know... so what does that all mean... ?... LOL Ok... Lender's fees are fees that offset the cost of producing the loan. Different companies may refer to them by different names, such as, processing fees, broker fees, tax service fees or underwriting fees; or you may have heard these fees referred to as Junk Fees. Most lenders are very sensible and fair about these fees. Obviously all businesses are in business to make a profit. Lender Fees are one of the vehicles that generate profits for lenders. Years ago I wrote an article for an On-Line Real Estate Forum, about Predatory Lending. CLICK HERE if you would like to read that article, but keep in mind that the figures in the article are very outdated, however the nefarious activities I write about are, unfortunately, still very much a part of the lending arena. I think that article will explain what you do not want to see in your lender.I could write hours about the loan and lending process because the entire process is so interesting and is very involved. Here are a couple of more nuggets for you to ponder.QUESTION: Is there a difference between APR and Interest rate?You bet! The APR (Annual Percentage Rate) reflects the cost of your mortgage loan as a yearly rate. It also incorporates the cost to obtain the loan, such as discount fees and loan origination fee. The interest rate is the actual note rate.When you finally get to the closing table, you will be presented with a TIL (Truth In Lending) statement. You will undoubtedly ask: "Why is the Annual Percentage Rate (APR) on the Truth-in-Lending Disclosure higher than the rate shown on my mortgage note?" Here is a simple explanation:The rate reflected on the APR shows the cost of your mortgage loan as a yearly rate. This rate is generally higher than the rate stated on your mortgage note because, in addition to the interest rate, APR includes other costs such as origination fee, loan discount points, pre-paid interest, and mortgage insurance. The APR allows you to compare, in addition to the interest rate, the total cost of financing your loan, among various lenders.CLICK HERE for an example of several loan scenarios in a spread sheet provided by one of our most reliable lenders to one of our past eClients. As you can see, the buyer was purchasing a home for $189,000 (that’s not going to happen again any time soon! LOL) and was pondering a VA loan VS. a conventional loan. This purchase was for an "as yet to be built" new construction home. If the buyer chose to NOT use the builder's lender, he would have given up $4,500 in incentives from the builder. This particular buyer had his own closing cost money and was able to put up to 5% down on the principal. All scenarios in the spread sheet are fixed rate loans, there are no ARMs (Adjustable Rate Mortgages), although to opt in for an ARM provided an even lower monthly payment for our buyer. The loan identified at the far right as an 80/20 is called a HELOC. This particular type of loan has been most attractive to our vets because it can be nearly 100% tax deductible and... as you can see... this type of loan produces a very low PITI (Principal Interest Tax and Insurance) payment. And... as you can see, if our buyer’s target ceiling were a $1,500 PITI monthly payment, he could actually increase his purchase well above $200,000 while still keeping his monthly payment well under $1,500. There is one catch to being able to take advantage of a HELOC, the buyer must have GREAT credit... the good news is... YOU DO!Well... now that I have totally confused you...Bye for now... and we'll be in touch in a couple of weeks. Lori and I trust that you are enjoying your FREE subscription to your CLUB membership.