FAQ: Why Are Your Interest Rates So High?
My lender only charges 2 points of origination and 7.5 percent!
They aren't high if you understand that when comparing The Short Term Retirement Program to your local bank lender, you are not comparing apples to apples.
Your lender offers a 'lower' rate because they know that they will make their money in the following ways:
1) Yield Spread - is the money or rebate paid to a mortgage broker for giving a borrower a higher interest rate on a loan.
2) Origination Fees - fees charged with producing the loan.
3) 'Junk' Fees - largesse charges on your good faith estimate, such as 'Doc. Prep' fees, 'Courier' Fees, etc. Rarely are couriers used and it is understood that documentation is ALWAYS part of a loan origination process.
4) Pre-payment Penalties - Costs associated with paying the loan off early, placed to
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discourage a borrower from doing so and meant to encourage a better interest yield over time.
5) Variable Rate Products - when banks offer a low 'teaser rate' to make a home loan look more attractive than it actually is. Once the borrower is laden with the loan, the interest rate can be raised providing more fee income for the bank.
6) TIME - The bank wants you to pay interest on the mortgage as long as possible, and the longer the loan is in effect, the more interest the bank makes. This is why you RARELY attack principal on a 30-year loan in the first 5 years.
If time is your greatest enemy with a loan, as well as your most expensive resource, then ELIMINATING THE TIME that you are responsible to pay on the loan is the only effective solution. By front loading interest on traditional mortgage products, banks win and you lose,
If you mortgage a 40k property for 30 years at 7.5% you pay about $51,000 in interest alone. The Short Term Retirement Program pays itself off in 5 years and you only pay about $7,000 in interest TOTAL. When compared side by side, The Short Term Retirement comes out to be the
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most sensible and innovative investment product available today - hands down!
But My Bank Will
Give Me A Better
Rate!!!
Will it? A 30 year loan of $40,000 with 20%
down at 7.5% with about $5,000 in
closing costs and prepays (about $13,000
total) costs about $10,300 in INTEREST ALONE after 5 years, and you still
have $33,000 left to pay on the loan over 25
years!!!
A 5-year loan of $40,000 with 50% down(all
applied towards principal, or $20,000) at
12.5% interest and $5000 in closing
costs and prepays costs only $7,300 in
interest after 5 years - AND THE LOAN
IS PAID OFF IN FULL!
Now you decide - which interest rate is better?
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