When you purchased your home, you most likely got a fixed interest rate mortgage with a 15 or 30 year term. These are the most popular mortgages in the industry. Even in the summer of 2004, when the interest-only or simple interest mortgage loans became popular, the average American stuck to the fixed rate. You see, the fixed rate offers security to conservative people, and the average American home buyer and home owner is a very conservative person.
Today, it's time to ignore that conservative nature and throw out that fixed rate mortgage. If you have a home, no matter when you purchased or refinanced your mortgage, you now need to refinance your fixed interest rate mortgage to an adjustable rate mortgage.
Now, before you begin to panic and start calling me all kinds of unsavory names, read on, and you'll see why an ARM is actually a cash goldmine, and you need to start panning for this gold immediately.
When I was originating loans fulltime, I could barely get the word ARM out of my mouth, before the customer would say, "Oh no! I don't want an adjustable mortgage. I've heard how the rates change and your payment skyrockets, and some people actually lose their homes. No, no, I don't want my rate to change." Of course, once I illustrated the thousands of dollars they would save in just a few years and quashed all of those myths about loan payments "blowing up," most of them decided the ARM was not the "devil loan" it's made out to be.
But why risk an adjustment of your rate, you may ask, when you can have it fixed for the life of the loan? The answer is twofold and quite simple. The first part is the most important, and that is the average American either sells or refinances his or her home in four to seven years. So, if the chances are that you'll sell or refinance in five years, why fix your rate for 30 years at a higher interest than you can get on an ARM?
The second reason to get an Adjustable Rate Mortgage is because the interest rates are so much lower than fixed rates. And since these great rates are fixed for a particular period, five years on a 5-year ARM and three years on a 3-year ARM, there really is no risk, at all. Again, in most adjustable rate mortgage programs, the interest rate does not adjust monthly or yearly (although programs with these types of adjustment periods do exist at much lower rates).
For example, as of publication of this article in 2004, the 30-year fixed rate mortgage was going for around 5.75%, and a 5-year Adjustable Rate Mortgage was going for about 4%. Suppose you're financing $100,000. The 30-year fixed rate of 5.75% would give you a monthly payment of $583.57 (not including your taxes and insurance, which vary from state to state and county to county). The same $100,000 financed at 4.0% interest yields a monthly payment of $477.42. The difference in these two payments is $106.15. This is $1,273.80 each year, and $6,369.00 for five years. I can hear you saying, "Wow, that's hard to believe," but these are real numbers and real savings. You may be saying, "Sure, but the rates change." This is true, but the difference in the fixed rate mortgages and the ARMs is almost always the same, regardless of what rates the market bears, so you'll always save a ton of money in the difference in these two payments.
The numbers are even more staggering if you finance $150,000. The fixed rate payment is $875.36 and the 5-year ARM payment is $716.12 ? a monthly savings of $159.24 and over $9,500 for five years. If you buy or refinance a home and finance $200,000 or more, you'll save between $13,000 and $15,000 over five years, with the 4% rate as opposed to the fixed rate of 5.75%.
Bank that money and you can buy a decent car for cash, or pay for a year of college, or take a European vacation. Pretty powerful stuff, huh? Now, if you're one of those people who is really into cutting into the term of your mortgage, and you can afford the higher fixed-rate payment, simply apply the difference back to the principal loan amount. You'll build equity in your home very quickly, and you'll always have the option of paying the lower payment.
So, get your adjustable rate mortgage today, and start using your own personal goldmine.
Mark Barnes is author of the wealth-building system, Winning the Mortgage Game and other investment real estate books. He is also a suspense novelist, and his new novel, The League, will thrill both suspense and sports fans. Learn about Mark's wealth-building system and get his free home loan course at http://www.winningthemortgagegame.com. Learn more about The League and read an excerpt at http://www.winningthemortgagegame.com.
Imagine being able to steal untold millions of dollars in... Read More
Here are some thoughts about the morphing of thought and... Read More
The inability to come up with the necessary cash when... Read More
Financial freedom is the power to do what you will... Read More
1. Save up to 50% per month on convenience cleaner... Read More
Financial planning is an ongoing process individuals and businesses should... Read More
Whether an established conglomerate or a fledgling company, a business... Read More
There are many of us who are working on our... Read More
From tender age, we were exposed to myths about money... Read More
Many of us do not consider the underlying belief system... Read More
Everyone dreams of early retirement. The idea of no longer... Read More
Want to be one of the lucky ones on the... Read More
As a work at home Mother, I know the value... Read More
No one has complete control over their thoughts. But with... Read More
How many people search Google, Yahoo and MSN each day... Read More
This 4,000 acre sale (now a marina and resort town... Read More
In today's unpredictable global economy, you obviously never know what... Read More
Look at Forbes' top 10 United States wealthiest people. Notice... Read More
The fact is that most people continue to work for... Read More
Recently I was reading a book called The Millionaire Mind.... Read More
Points to ponder as you consider what can be done... Read More
Everyone wants to be wealthy. Only a few actually achieve... Read More
Yesterday we learned that 74% of all wealth is created... Read More
Key 1 Pay your self firstkey 2 Saving is not... Read More
You have $100 in your bank account, your rent is... Read More
Many people don't realize how much money they spend on... Read More
Wealth - an abundance of values. Each of us determines... Read More
When Ben Franklin said "a penny saved is a penny... Read More
Imagine being able to steal untold millions of dollars in... Read More
There are only 2 ways to grow your wealth -... Read More
As a work at home Mother, I know the value... Read More
Turn to the year 1999, a couple of friends sitting... Read More
Simple tips on saving can very often make quite a... Read More
While you need to have a lot of positive-thought and... Read More
I am often amused by the ads and offers I... Read More
In theory the idea of generating additional (and passive) business... Read More
If you don't have discipline then walk away from the... Read More
Articles on 'How to make money' come a dime-a-dozen. How... Read More
I counsel a LOT of people about money. I see... Read More
This retirement account is so new and unique that you... Read More
Most people work hard all their lives only to "retire"... Read More
Time and time again entrepreneurs are losing out on getting... Read More
As you sit in traffic, inching along between irate drivers,... Read More
According to Wallace Wattles, in his popular wealth treatise called... Read More
A residual income is one that comes in no matter... Read More
Here's the truth: I have read hundreds and hundreds of... Read More
In most societies, we are raised to believe in the... Read More
At any time in history, no matter what the current... Read More
The idle are a peculiar kind of dead that cannot... Read More
Most people want to get to the end of their... Read More
Wealth Building |