| San Ramon, CA -- Federal Reserve Board Chairman, | | | | current low rate) and take out a Home Equity Line of |
| Alan Greenspan, commented best when he stated | | | | Credit. |
| "Homeowners might have saved tens of thousands | | | | Currently our economy is prospering; this good news |
| of dollars had they held Adjustable-Rate mortgages | | | | creates a rising Prime Rate, which increases the |
| rather than Fixed rate mortgages during the past | | | | payment rate on your Equity Line of Credit. Some |
| decade". If you own a 30year fixed mortgage, the | | | | people are using their Equity Line of Credit accounts |
| first 10years of your payments will be applied | | | | in order to maintain their current standard of living. |
| towards paying down your mortgage interest; on | | | | One of two things will eventually happen: a) The |
| average only 15% of your original principle balance will | | | | client will have to prematurely sell their home because |
| have been reduced. Considering the fact that most | | | | they can't afford the payments or b) The client will |
| people will live in their homes approximately 5 to | | | | maximize their existing equity and be forced to make |
| 7years, it makes since to plan what your goals will be | | | | higher payments; this scenario has the possibility of a |
| before deciding on a loan program; your decision | | | | foreclosure waiting to happen. |
| could affect your financial planning for the next | | | | In addition to establishing your goals and determining |
| 10years. | | | | the right loan program, you should also understand |
| Statistically speaking, if you have a family of four (2 | | | | the character of a real estate investor. Treat your |
| adults and 2 kids), a loan balance of $400K with an | | | | property as an Investment and NOT a Retirement! |
| interest rate of 4.5% (4.642% APR), you'll need a | | | | Learn to use your equity as leverage in order to |
| Combined Yearly Income of $140,000 just to Almost | | | | obtain greater wealth! Ask yourself what are you |
| Break Even each month; actually you could have a | | | | trying to accomplish with this transaction? In our |
| loss of approximately $478 per month. | | | | opinion, "rate shopping" is the old process for |
| Here's the breakdown: Income $140K per year x | | | | selecting a mortgage loan and it should be replaced |
| 35% (tax bracket) = $91K per year ($7,583 mo.) | | | | with "payment shopping". Did you know there's a loan |
| Monthly Expenses: $2,027 (Principle + Interest) + | | | | program available that may have a higher interest |
| $417 (taxes) + $117 (home insurance) + $1K (2 car | | | | rate than you currently have, but provides you with |
| payments) + $800 (food) + $500 (health insurance) | | | | a lower monthly payment (plus extra monthly |
| + $2K (family of 4 living expenses) + $300 (student | | | | cash-flow), and no negative amortization? Also, don't |
| loans) + $300 (credit cards) + $600 (childcare | | | | view negative amortization as a dark cloud in terms |
| services) = $8,061 Total Expenses. These figures | | | | of loan programs; depending on how long you plan on |
| don't include any increases from your local county | | | | staying in your home, this lower payment option |
| assessor's office, car repair bills, cost of living | | | | could be a blessing in disguise for the true Real |
| increases, cable or satellite services, utilities, etc. | | | | Estate Investor. |
| Rather than considering shorter termed loans (with | | | | Copyright © 2005 2002 - 2005 Brisco & |
| more favorable rates and payment options), the | | | | Associates. |
| customer will keep their existing loan (they like the | | | | |