1% Mortgage Loans… Is It Real?
Material information you need to know so that you can take advantage from a 1% mortgage loan.
While there are a lot of hype on 1% mortgage loans, whether you can exploit them is really a matter of common sense.
There have been many stories in history that tells us of people who felt “cheated” on their mortgages after some time into the mortgage loan. So it really makes sense for you to ensure that the mortgage loan that you are being offered for is set up properly from the start.
Another factor to take note is that you are properly utilising the mortgage loan facility you have taken up.
You have to know how the loan works and how to structure the mortgage loan up in a way that you can legitimately harness the advantages that these mortgage loans have to offer you.
As with most mortgage loans with best interest rates, 1% mortgage loans have many struture options as well. Every time you receive your mortgage loan statement you will see options to make an interest only payment, a 30 year fixed payment, a 15 year fixed payment and a minimum 1 % payment.
With the luxury of so many payment options, you should only select the 1% minimum payment no matter how tempting the other options are to you.
Why is that?
Because you did not sign up for the other mortgage loan options in the first place. If you had wanted to chose 30 year fixed, 15 year fixed, or interest only payment, you should have chosen then from the start when you applied for the mortgage loan. Generally, these types of mortgage loan payment structure are have higher current interest rates.
When you select the 1% minimum payment, you will get a considerable monthly mortgage loan payment reduction. This will be a considerable benefit for most home owners no matter how rich you are.
To further increase the advantages of selecting 1% minimum payment, you should save. As an example, let’s say you managed to get refinancing for your house with a 1% house mortgage loan, you settled your credit card debts with your banks, and reduced your monthly debt repayments by $1,000 a month. If you save that $1,000 every month instead of giving it to the bloodsuckers who drool on every dollar they see hanging off of you, you will have excess $36,000 in excess cash at the end of 3 years. I don’t know your financial background, but that sounds good to me.
There is another bigger advantage by exploiting the 1% minimum payment option:
Tax savings.
When you make an interest only payment, your house mortgage loan balance will not move. That means that when you make a 1% minimum house mortgage loan repayment, you will be paying less than interest. You will be creating deferred interest which makes your house mortgage loan balance increase every month. Keep in mind that deferred interest is house mortgage loan interest and is exempted from tax computation.
This also means that if your home is appreciating in value at $2,000 a month. The 1% mortgage loan will allow you to benefit from the appreciation and apply it as a tax deduction. In effect you are accumulating tax deductions each month. If you chose not to do this, all of your gains in your property appreciation would be locked up in property equity with no returns.
This way, with a 1% mortgage loan you can accumulate equity and have cash in your bank.
This is how you can exploit 1% house mortgage loans and be better of because of it.
Note that if the deferred interest is of particular concern to you, try making at least bi-weekly payments. This will reduce, and in some instances eliminate the deferred interest altogether without increase your house mortgage loan outstanding balance.
Facts of the 1% mortgage loan:
1) The 1% payment option on these loans is only for the first five years of the mortgage loan. But you could actually keep them for 30 or 40 years. When you chose a 40 year mortgage loan your monthly instalments will become lower but the payment options will not last for five years. Your goal is to maintain and stretch out the 1% payment for as long as you can. You can chose to take up a 30 year amortization house mortgage loan structure.
2) Because 30 year, 15 year and interest only payments mortgage loans are tied to an index, you can choose a less volatile and slower moving index like the MTA (Monthly Treasury Average) instead of a faster moving index like the Libor (London Inter-Bank Offered Rate).
Since I’ve been talking about the advantages of a 1% mortgage loan, you may think about how you can possibly lose with one. Well you can, due to depreciation.
This will be especially so if your property resides in an area that is rapidly depreciating in value.
But if your home is located in an area projected to increase 3% to 5% every year, all I’ve discussed previously should come into play.