Saturday, May 28, 2005

Is a 1% rate right for me?

As a consumer, you are bombarded with commercials on the radio and television, as well as those pesky postcards and mailers - from lenders that seem to come out of the woodwork promising to lower your mortgage interest rate and payment. One of the most commonly asked questions that I receive is "how can a 1% rate be real?". Well, in this case, it is. However, this is a payment rate, not the actual note rate. The payment rate is all that is required by the lender to be paid, while the interest rate is what is actually due on the note. This loan program is popular here in Ventura County, where our property values are so high. It is also the loan of choice for most investors, as it reduces the negative cash flow on rental properties. BUT THERE IS A DOWN SIDE!! When you make a minimum payment, you may be deferring a portion of the actual interest that is due, and that results in a term called NEGATIVE AMORTIZATION.

Know the facts before you choose the loan program that is right for you!


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