Continued… Before you freak out, keep in mind that deferred interest is mortgage interest and is therefore tax deductible. Let’s say your home is going up in value $2,000 a month. The 1% mortgage loan will allow you to take a small piece of that appreciation, say $500 a month, and turn it into a tax deduction. So you are taking a small piece of your equity each month and turning it into a tax deduction. If you did not do this, all of your appreciation would be locked up in equity. Equity is terrific and is certainly one of the many benefits to home ownership. But investing in equity will get you a zero percent return. No one is going to cut you a check each month for the equity in your home. As a matter of fact, if you wanted to get the equity out of your home you would have to sell your home or get a loan. And you better qualify or you will not be able to get a loan.
So why not take a small piece of your equity each month, turn it into a tax deduction, and at the same time save $1,000 a month for your self? You will still have plenty of equity but with a 1% mortgage loan you will have cash AND equity. If you do this for any length of time you will come out way further ahead financially than if you did a regular 30 year fixed or an interest only mortgage loan. By the way, if the deferred interest is a concern, try making bi-weekly payments. Making a bi-weekly payment will reduce, and in some cases eliminate the deferred interest all together. Which means your mortgage balance would not increase. How to set the loan up correctly: 1) The 1% payment option on these loans is only available for the first five years. But you could actually keep one of these loans for 30 or 40 years. If you select a 40 year loan your monthly payment will be lower but the payment options will not last for five years. The name of the game is to keep the 1% payment for as long as possible. So get a 30 year amortization. 2) The 30 year, 15 year and interest only payments are tied to an index. Select a slower moving index like the MTA (Monthly Treasury Average) instead of a faster moving index like the Libor (London Inter-Bank Offered Rate). So how can you lose with a 1% mortgage loan? Answer- depreciation. If homes in your area are rapidly going down in value, deferred interest could cause you to become upside down in the home. But if your area is experiencing a 3% to 5% rate of appreciation and you save what you save by making the minimum payment, a 1% mortgage loan can have an incredibly positive impact on your financial future.
For more information about 1% mortgage loans and other mortgage related topics, please visit: http://Mortgage-Training.Mortgage-Leads-Generator.com As always, hope it helps, Jake –
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