5.875% + 6 months no payment!

This morning, I heard an ad on the radio selling an amazing loan program!

5.875% 30 year fixed rate + No Payment for 6 months!

Wow! It sounds too good to be true.

It is. I haven't called in to shop this loan program, but before getting excited let's take some time to guess where 6 months of payment freedom comes from. It's going to be one of two places:

1 - EQUITY!
2 - Closing Costs (Since we'd be talking about 6 months of payments rolled into your closing costs, I think its fair to say that this 'payment freedom' will in fact be 'equity payments.')

There is no such thing as a free lunch. This program simply offers you the opportunity to eat up your equity. However, it may be a good fit for a select few people.

Let's say you have great credit but have just experienced major unforeseen expenses and need some help to get back on your feet. Perfect!

On the other hand, if you are incapable of living within your means and need payment freedom to pay down $15,000 in credit card debt, this isn't a solution. It's a band aid. The real problems? Financial management, self-control and budgeting.

Shady marketing is just that.... shady! The company has one goal, and that is phone calls. Once you've called, I hope you are ready to be told that you don't qualify because of ________ (select one or more: credit, employment, assets), but you do qualify for this higher interest rate loan that will allow you to skip two months payments!

I hope they mention that every refinance allows you to enjoy no mortgage payment for two months.

I also hope that they disclose where the money for this payment freedom is coming from.
A - Equity
B - Closing Costs

I encourage you all to trust your home to financial professionals who are not transaction driven, but people driven. You deserve a consultation where your needs and goals are discussed. Let's all get past minimum payments and start talking about how you can work towards financial freedom! It can be a reality, but it's not going to fall into your lap!

Wishing you all a wealth of real estate knowledge in 2008.

Enough Already!

Log onto msn.com or yahoo.com or espn.go.com.... After clicking on an article or two, you'll notice that there are mortgage ads. 4.65%

Wow!

The aids fail to tell you that this requires either negative amortization or a rate buy down. These products may be the right fit for a very select few borrowers. However, for 99% of the population, its not reality!

It's a teaser!

It's shady advertising.

If a company tries to earn your business by advertising a rate you don't qualify for, is that really someone that you want to trust with the financing of your greatest asset, your home?

No Cost Loans!!

Yesterday morning, a tv ad caught my attention. 'America's Home Lender' was advertising 'No Cost' loans!

No administrative fee.
No processing fee.
No credit fee.
No title insurance fee.
No recording fee.
No appraisal fee.

This is incredible! This sounds too good to be true!

'No Cost' loans are a great product, but they aren't no cost. (If something sounds too good to be true, it is.)

Below, I'm going to explain how a 'No Cost' loan works.

Appraisal, processing, credit, title insurance, recording and other fees are paid out of a couple of potential sources.

1 - Equity. If the pay off for your current loan is $200,000 but your new loan amount is $207,000, can you guess where the cost of the loan is? You guessed it... EQUITY!
....That being said, if you don't have/want to bring in $7,000 in order to close your loan, this is a good deal, BUT it is not a true no cost loan!

2 - Interest Rate Premium. The higher the interest rate, the more the bank pays mortgage professionals. By raising the interest rate a point or two, there can be more than enough $$ to cover the costs of fees which make it possible to bring no money into closing! Once again, this is not a true no cost loan, BUT it could be the right move for someone who doesn't plan on staying in their home long term, doesn't have $$ to bring to closing or is willing to refinance again in a few years.

Folks, mortgages are expensive. Addictions to refinancing regularly quickly eat up all of your equity (and sanity). Get into a fixed rate mortgage, make an extra payment occasionally (after you put some reserves into your savings account) and give the market an opportunity to provide you with some equity!

Wishing you all a wealth of real estate finance knowledge!

Marketing!

Here is the deal. I haven't listed my property yet. I'd really like to sell without involving realtors as it costs me 6% of the sales price and I have plenty of experience dealing with real estate contracts. Here is what I'm doing so far....

Open House Special
-Pricing over 5% under market value for open house
-Distributing flyers with pertinent information to local real estate agents and offices.
-Advertising on Craig's List.

I'd be open to hearing any suggestions.... matt.d.hanna@gmail.com 720.236.9695