Simple Intrest loan

dannyboy · Joined: 29 Jul 2005 Posts: 3

:?:

I have question , I am currently doing a refinance at 5.875 apr.
One of my coworkers over heard me and said he could help me get a
biweekly simple intrest loan. Heres the kicker that got me , he said the intrest rate may be 2 points higher but would save me intrest hows that?
I read up on this type of loan. It seems fishy to me. This guys an accountant at work. One thing I learned in the miliatary is most people don't have your own intrest at heart.
I figure that that I could do my own 13/12 payment plan . I would save more intrest than at 2 points higher. I have never heard of taking a loan at a higher intrest rate. I think in the industry its termed as a true biweekly mortgage.
He does this on the side of our company job that he has. But has done 6 of these loans for other people at work. I think the other people at work figure at work that he is an accountant and he would know what he is talking about, more less trusting his advice without and researching.

Thanks for your time
Nice board learned a little bit more about mortgaging
Danny

chow · Posted: Fri Jul 29, 2005 12:13 pm Post subject:

You are correct, Make one payment extra a year, or just divide your payment into 12 months, and make that much extra a month. You will accomplish the same thing. I never saw any reason for people to do these twice a month payments unless they needed the budget help. (You can do that on your own. Just start by paying the new loan two weeks before the due date, and on the due date send in the other half.)

Two points higher in rate?

Where is the "savings?"

Haplo · Joined: 20 Jan 2005 Posts: 2422 Location: Springfield, IL

It may not be a huge difference but doing it monthly will save you about 4 payments over the life.

Ultimately it could be better if it wasn't for the fact that it's 2% more interest. It doesn't just sound fishy ;) It sounds down right silly.

pamortgageman · Joined: 21 Jul 2005 Posts: 31 Location: Pennsylvania

That doesn't make any sense at all, your instincts are correct. You may want to check his breath for booze, because he must be drunk if he really believes that a 2% higher rate with bi-weekly payments is beneficial in any way, other than to him.

capnmorgan5555 · Joined: 29 Jan 2005 Posts: 29

Sounds like your friend has been Primerica-ized!

dannyboy · Joined: 29 Jul 2005 Posts: 3

:shock:

Wow that is the companys name. I figured I did the calculations correctly. Kinda makes me want to put my foot up his #ss, being a coworker. I feel for my other coworkers,he has done this to. No wonder people have quit trusting each other in america.

Thanks for the help folks

Dan

Haplo · Joined: 20 Jan 2005 Posts: 2422 Location: Springfield, IL

Haha I was wondering if it was them ;)

capnmorgan5555 · Joined: 29 Jan 2005 Posts: 29

Dannyboy,

Tell your co-worker you got a heck of deal, if you make one payment the day your loan closes that is equal to the amount you borrowed you actually have a 0% interest rate. :lol:

chow · Posted: Sat Jul 30, 2005 10:53 pm Post subject:

capnmorgan5555 wrote: Dannyboy,

Tell your co-worker you got a heck of deal, if you make one payment the day your loan closes that is equal to the amount you borrowed you actually have a 0% interest rate. :lol:

Well, considering I have done credit repair seminars for some Priamerica offices...and the "LO" doesn't even get to see a credit score, or a report, or understand the first thing about any aspect of underwriting like most full time LO's do...

I don't know if his co worker would even understand the LOL!

There is nothing like watching a room full of newbies from Priamerica on a saturday morning at 9:00 and going over credit. You mention certain areas, and it's like you have 40 deer (doe's), facing you with the look of headlights in the face.

You have to just work yourself in as a guest speaker or a helper for a seminar.....and get a good laugh! It's worth it!

Haplo · Joined: 20 Jan 2005 Posts: 2422 Location: Springfield, IL

I might have to do that!! There's a primerica office just down the street from us heh.

chow · Posted: Sun Jul 31, 2005 10:11 am Post subject:

They can only do A paper, so you take all the subprime. You refinance them, pay down or off credit, so they can buy primamerica's insurance products or some other investment tool.

Term Insurance, or some savings- is better than none at all....... :wink:

Haplo, if you need a little marketing help with it-let me know. I have a ton of stuff in print already. You take 10 minutes, pass out some bifolds, go over the basics, and at about minute 5 of your presentation.....you have a room full of "deer."

It's worth getting up and dressed on Saturday-better than cartoon's!

dsickler

I'm not here to endorse any video's or books, but as a suggestion you should go out and borrower or buy a copy of a video by a gentleman named Ric Edelman. It's called "5 reasons why you should carry a big long mortgage. He talks alot about the different between paying off your mortgage quickly through a 15 year mortgage or biweekly as apposed to a monthly 30yr mortgage. I have this video and some of the info he goes over in his video is:

For example, if you were to get a 30yr loan instead of a 15 year loan, you would save about $200 to $300 per month. Take the savings and put it somewhere, a savings account, CD, Annuity, UL's whatever. I am willing to bet in the 15th year, you would have enough to pay off the mortgage and still have money left over. So if you want to pay the mortgage off sooner, do it with a 30 year mortgage and save the difference instead of doing it with a 15 year mortgage.

The best part of that is since your saving the money, if something happends along the way, and you lose your jobs, can't make the mortgage payment, car break down, whatever, you have access to the money instead of letting it get trapped in the equity of your home, where you may not be able to access it again later.

Now back to your comment about Bi weekly programs.
Never get a Bi-weekly payment program. It seems harmless enough, i'm sure. Send half a payment now, and then half a payment later. But financially it does you no good.

If you realize that there are 52 weeks in a year, that's 26 half payments, which is equal to 13 full payments. In other words, your making one full extra principle payment each year to your mortgage, non of which is tax deductable.

If I were to let you borrow $100 today, and said you don't need to pay me back until next week. Would you pay me back tomorrow if you had the money? why, when you could invest that $100 and earn interest for the next couple of days before you have to pay me back.

Even though a bi-weekly mortgage will help pay off the mortgage sooner and save you money by paying less in interest, you are also losing money by not investing that money in your own account, plus you lose the tax right offs from paying off the mortgage early. In the long run, you are spending $2 to save $1. It's not worth all the effort.

Oh and about that simple interest bi-weekly crap. i did the math and found that's the equivilent of a 15 year mortgage with about $200 to $300 extra on your payment to pay off the loan in 13-14 years instead. In other words, you sending more to the bank and saving less for you self.

Just my 2 cents. :wink:

David

chow · Posted: Fri Aug 05, 2005 6:10 pm Post subject:

Yes, I guess that's all well and fine, if someone is camped on your check when you cash it, and actually deposits the correct amounts into a account for investments. That's why these people make money! They/We pay them to be a savings and investing eagle wye for us!

Our problem is: We want it all- now.

If people just kept 10% out of a check from personal income, and saved it-let it grow then invest it...in a few years, you have some money. If people just gave 10% of time, and invested it, to help others, in time-a community will prosper.

On the mortgage issue? I bought my house for $30k, it's worth 8 times that. Why would I mortgage that amount? I'll sell it and go invest the money! There is no way, on God's Green Earth, I would ever give up this investment when I can pay off all of my bills each month. The "slick sales pitch" of a 30 yr, mega mortgage doesn't work for those of us who are equity heavy. I just can't get into a plan that keeps you equity poor in a market where we are facing a housing balloon. Then I have to make big mortgage payment too.

(that is where values drop after you buy, and you're over mortgaged due to a loss in the market value of homes??? You did study this angle too?)

You can't sell a program like this to anyone. It's hard selling it to a baby boomer who's learned the ropes of a bull and bear market in the stocks, and housing business.

dsickler · Posted: Fri Aug 05, 2005 7:14 pm Post subject:

chow wrote: Yes, I guess that's all well and fine, if someone is camped on your check when you cash it, and actually deposits the correct amounts into a account for investments. That's why these people make money! They/We pay them to be a savings and investing eagle wye for us!

Our problem is: We want it all- now.

If people just kept 10% out of a check from personal income, and saved it-let it grow then invest it...in a few years, you have some money. If people just gave 10% of time, and invested it, to help others, in time-a community will prosper.

On the mortgage issue? I bought my house for $30k, it's worth 8 times that. Why would I mortgage that amount? I'll sell it and go invest the money! There is no way, on God's Green Earth, I would ever give up this investment when I can pay off all of my bills each month. The "slick sales pitch" of a 30 yr, mega mortgage doesn't work for those of us who are equity heavy. I just can't get into a plan that keeps you equity poor in a market where we are facing a housing balloon. Then I have to make big mortgage payment too.

(that is where values drop after you buy, and you're over mortgaged due to a loss in the market value of homes??? You did study this angle too?)

You can't sell a program like this to anyone. It's hard selling it to a baby boomer who's learned the ropes of a bull and bear market in the stocks, and housing business.

I agreed with you up until you started talking about the housing balloon and stated that the 30yr mega mortgage doesn't work for those of us who are equity heavy.

My personal View on that, is those who are equity heavy are those most at risk of losing out. I'll share a story from Missed Fortune 101 by Douglas Andrew.

"I am familiar with a married couple who purchased a home-paying no cash down-the year they were married. The husband was 22 years old at the time, and his wife was 21. Nine months later they sold the house and built a new one-again without paying anything down. Two years after that they were able to build their third home for $150,000-a 6400 square-foot house-with no money down. They understood a down payment would not earn a rate of return sitting lazily and idly in their house. The market was strong where they lived when they built their third home. They thought they had the world by the tail as they bought and sold other investment properties in a similar manner. They resided in their third home for four years, during which time it appraised, at one point, for $300,000. They felt secure with $150,000 of equity realized through appreciation of the home. Then something happened, and they had little to no monthly income for nearly a year.
They tried in desperation to borrow on their home, but without immediate ability to make payments, they couldn't find a lender who would loan them the needed money. They sold as many liquid assets as they could to keep their mortgage current. They finally put their home on the market seeking relief from the house payment and access to the equity trapped in the house. Due to the region's shift to a soft market (where there is a greater supply of homes for sale than demand to buy), they were forced to continually lower the selling price of their home, from $295,000 to $199,000. Finally, after nine months, they were forced to surrender their house to the mortgage lender (the highest bidder) at a sheriff's auction on the county courthouse steps. Their home was foreclosed on, and they lost $150,000 of equity, and their credit was blemished for seven years. The mortgage lender finally sold their home several months later for $30,000 less. This deficiency balance was also reflected on their credit report for the following seven years.
Through this experience, the couple learned some unforgettable lessons:
1. They learned the importance of keeping their assets in investments that were liquid in the event of an emergency.
2. They learned the importance of maintaining flexibility in order to ride out market lows and take advantage of market highs.
3. They learned it was a lot better to have access to their home's equity and not need it, than to need it and not be able to get it.
4. *Most important, they learned that a house was a place to house families, but not to store cash safely.

I know they learned to never allow a significant amount of equity to accumulate in their property without maintaining liquidity, because my wife and I were that couple!" Douglas Andrew.

chow · Posted: Fri Aug 05, 2005 10:08 pm Post subject:

The 30 yr mega mortgage. Read the note and the terms-after what you've been through.......

Is it any better? or just a brief reprieve?

I have never asked anyone on a board a more honest question.

I am not here to hurt you, I'm just here to help.

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