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How the 2.95% plan and 2.45% plans work

To calculate your monthly payment at 1.95%, you must multiply your loan amount by 3.7. (  100k times 3.7 =$370. principal and interest

The 1.95% plan are cash flow, payment driven products that are designed to reduce the initial monthly payments by approximately 40% and to offer preset payments for approximately five years, depending upon which lender. Typically the payment rate will start out around 1.95% the first year, and then over five years, the payment rate will go up gradually to the full index rate that is currently around 4.83% to 5.96% range.(02/03) Once the client reaches the full index rate, it remains at that monthly changing rate for the remainder of the term.
It is a unique, one of a kind, one month ARM product with preset payments. You have the options each month of paying the 1.95% minimum principal and interest, which pays out in 23 years with a bi-weekly, which is optional. It's all about options and cash flow. A client can pick a payment. They can pay the minimum principal and interest,( which pays out in 30 years), the 15 year payment, the 30 year payment, or interest only. We typically recommend paying extra towards the principal each month and by doing so; the client can shorten their term more than 23 years if they utilize a bi-weekly feature.
If the client saves $500.a month, as an example only, it would be wise to apply an extra $200 a month towards the principal and invest the difference in savings plan. By doing this, the client has reduced the term, and has started a new saving program. The concept is to shorten the term by paying off the principal early, and develop cash flow for a saving plan of your choice. What the client does with the savings each month is entirely their decision.

There will be a preset cash flow increase for a five year period that can be and will be predetermined to the dollar. As an example only, let's say that predetermined cash flow increase or saving from their current fixed rate loan was $33,155. total over five years. If the client invested that extra, new found cash flow at 8% for 30 years, they would be rewarded with $275,698. as a result of doing this type of mortgage. In some cases, this could be the difference in having a decent retirement fund, or living in poverty in retirement. The average median saving for boomers at age 55 is currently a meager $25,000., without accounting for debt. According to TIME magazine, nearly half of all households saved no money last year and 70% of Americans believe they will live well in retirement and only a third have calculated what they are going to need.

On a 6.5%, 30 year fixed note, you pay approximately the following balances per year: 1.102% the 1st year, 2.275% total the 2nd, 3.535% total the 3rd, 4.80% total the 4th, and 6.28% total balance paid at the end of the 5th year. It's like paying the minimum payment on a credit card if you ever refinance within five to seven years and start over. You must go 15 years undisturbed on your payments in order to reap the benefits of a 30 year note. Rate is not the issue if your going to disturb the note! Even if you could obtain a 4.5% fixed note, which doesn't exist, your balance would only go down 1.52% more than the above example at the end of the 5th year.

The math is fairly simple, 76% of the principal is paid the last 15 years if you are one of the rare ones who reach that point. Your paying what some call the penalty years up until then. Your in the wrong loan if your going to refinance within seven years. What we are saying at this point, it's not all about rates, but also about balances. What are you trying to accomplish in the long run?

This low rate loan is about cash flow, lower payments, shorter term, creating an income and more equity. The patented bi-weekly is a one of a kind plan that one lender offers. It is totally unique from all other bi-weeklies and is one of the reasons they talk about rapid am instead of negative am. Instead of holding the money until the end of the month, they apply it immediately. All other lenders hold your money until the end of the month with their bi-weekly and make interest off of it. It's not what you pay, but how the money is applied to the books that counts. The math speaks for itself on the computer proposal.

The 30 year note is back end loaded, for a tremendous amount of your principal is going to be paid down the last fifteen years, ( 76% ) if you ever get to that point. As a matter of fact, with a 30 year block note, you still owe 35% of your balance the last five years. Now you know why our great grandparents were wise in not refinancing. They knew better! Unfortunately people are forced to do it anyway because of the changing times, so they deserve a product that meets those needs.

The mortgage industry is slow and new products take time. There are basically only two types of mortgages, the Arm and the fixed products. The ARM products came out 20 years ago and they were initially complex and confusing. They were not appealing initially for they had no caps. Over the years, many mortgage products came and went, but Arms remained. About a decade ago, the new low payment rate Arm's hit the market and have been a huge hit with the public. It allows lower payments for five years preset. The logic is simple: most people only own a home for seven years and they are typically going to refinance or move either way. If this is the case, why have a back end loaded 30 year loan? Also assuming in five years that lenders are still competing for loans, there will always be lots of options and starter rates to choose from at that time.