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This mortgage calculator can be used to figure out monthly payments of a home mortgage loan, based on the home's sale price, the term of the loan desired, buyer's down payment percentage, and the loan's interest rate. This calculator factors in PMI (Private Mortgage Insurance) for loans where less than 20% is put as a down payment. Also taken into consideration are the town property taxes, and their effect on the total monthly mortgage payment.
Home prices have reached record levels, and in many parts of
the country, homes have become nearly unaffordable. Real estate
has replaced the tech stocks of the late 1990’s as the hot
investment, and everyone has sold their stocks and jumped into
investment property. Real estate prices have increased at a far
greater rate than salaries, and the lending industry has
attempted to solve this problem by introducing a tremendous
number of mortgage options for borrowers who barely capable of
purchasing a home. Most of these loan types feature adjustable
interest rates and minimum down payments. One of these, the
option ARM, is the most dangerous type of loan ever introduced.
Borrowers who are considering an option ARM should be aware that
this loan could leave them with a loan that is worth far more
than the home it’s used to buy and with a loan that he or she
cannot afford to pay. The option ARM is not for the squeamish.
So what, exactly, is an option ARM? An option ARM is a
mortgage with an adjustable interest rate that typically gives
the borrower four different payment choices each month. The
first choice is based on a 30-year amortization table; the
second on a 15-year amortization table. These would correspond
to payments for adjustable-rate 30 and 15 year mortgages,
respectively. The third choice is an interest-only payment,
which pays the interest that accrues during the month but pays
nothing towards reducing the loan amount. The fourth choice, the
one that makes this loan so dangerous, is called the “minimum
payment.” The minimum payment is calculated upon the first
month’s interest rate, which is usually a very low “teaser” rate
that can be as low as 1-2%. Most borrowers with an option ARM
opt to pay the minimum payment each month, and that’s where the
trouble comes in.
The loan carries and adjustable
interest rate, and this rate can adjust as often as every month.
If the borrower is paying only the minimum payment, then he or
she isn’t even paying enough to cover that month’s interest on
the loan. What happens then? The unpaid interest that has
accrued is added to the loan principal. The principal can
actually grow larger, and as interest due is calculated on the
loan principal, the interest due will increase, as well.
Interest rates are currently near all-time lows and are sure to
increase. A buyer who continues to make minimum payments on an
option ARM will find that the principal on the loan is actually
increasing over time! This is known as negative amortization.
In a negative amortization situation, only bad things
can happen. The lender can require refinancing under certain
conditions stated in the loan agreement. The buyer may find
himself unable to pay the loan and may have to default. And the
lender could find himself holding a note that is worth far more
than the house that it represents.
The option ARM is a
loan that is best suited to investors and homeowners who only
intend to keep the home for a short time. It is not a good
choice for anyone who may be using it to buy more home than he
or she can afford. Unfortunately, that describes a lot of buyers
who are taking out this type of loan. Anyone who is considering
a home purchase should be very careful if this type of loan is
offered, as it could leave you both bankrupt and homeless.
About the author:
©Copyright 2005 by Retro Marketing. Charles Essmeier is
the owner of Retro Marketing, a firm devoted to informational
Websites, including End-Your-Debt.com, a site devoted to debt
consolidation and credit counseling, and HomeEquityHelp.com, a
site devoted to information regarding mortgages and home equity
lending .