Anyone heard of this?

T

traderdon56

Evidently this type of thing has been available in Aus and UK for some time now, but just now getting to the US.

It's a way to drastically reduce the time it takes to pay off your mortgage. Watch the video at the bottom of the website.

I called my banker today( US Bank ) and he told me he heard about this over the weekend, but he didn't know enough to comment.

These guys want you to buy their software for $3500 a pop, but I'm sure this could be set up without it.

http://www.u1stfinancial.com

Don-
 
I just viewed the video. Correct me if I'm wrong, but this product is misleading. A line of credit has an adjustable rate whereas a 30 yr loan is based on a fixed rate for the life of the loan. Thus, when the fed raises the rates, your rate will increase also. Unless the program allows you to lock in the rate for the life of the loan, this is just another gimmick to trick people into getting an adjustable rate loan. Be aware.
 
5% cap


Quote from DonCorleone:

I just viewed the video. Correct me if I'm wrong, but this product is misleading. A line of credit has an adjustable rate whereas a 30 yr loan is based on a fixed rate for the life of the loan. Thus, when the fed raises the rates, your rate will increase also. Unless the program allows you to lock in the rate for the life of the loan, this is just another gimmick to trick people into getting an adjustable rate loan. Be aware.
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Quote from ElectricSavant:

5% cap
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I just saw that. That's 5% cap over start rate, not 5% for life of the loan. And it's an adjustable 1-month Libor rate. One thing that annoys me about the presentation is that they compare payoff w/ presumption that the ARM will be fixed for the life of the loan. That's comparing apples and oranges. Again, I'd be cautious about products like this.
 
DonCorleone,

Could you explain what this means, if you have the time Thanks :)

Michael B.

That's 5% cap over start rate, not 5% for life of the loan.
 
It means the maximum rate increase the lender can impose is 5% over whatever rate it starts you at. For example, let's say you obtain the line of credit at 5.5%. Over the life of the loan, the highest rate the lender can impose on you is 10.5%(5.5% start rate + 5% maximum cap). Also, remember that this line of credit is based on 1-month LIBOR, which means if the LIBOR goes up next month you'll be screwed basically because not only will you have to pay the balance based on higher rate, your balance will increase according to the rate.

Thus, the slides in the presentation are borderline fraudulent because they compare the payoff schedule based on assumption that the rate for the line of credit loan will be fixed for the remainder of the life of the loan which is almost always not the case. When the fed lowers the rate, this type of loan can be tempting, but as you know the fed has been raising the rates for awhile now. In addition, loans like this impose early payment penalty which means if you decide to refinance before an agreed term, you'll have to pay additional % in order to close that line of credit. Be cautious and read all fine prints before signing your name.

Remember, if it's too good to be true...
 
So if the start rate is 5.5% then its 5% over that...isn't that the same as the life of the loan? ...are you saying that the start rate floats with the libor?

I found this concerning prepapyment penalties, in their faq's

12. What happens when I pay off the loan EARLY?

If you pay off the loan early, you still have access to the accumulated equity, up to your credit line amount, until your 30-year term is complete. If you continue to make deposits into the account, and your loan is paid in full, those deposits will earn interest at a competitive rate.

I also note this

25. Why is there an annual fee?

Most mortgages do not have the ability to do transactions, and traditional home equity lines of credit only let you write a low number of checks (often with a minimum draw). This is a mortgage which gives you full transactional capabilities, which is what the annual fee helps offset. Compared to the amount of interest you'll be able to save, it's a relatively small fee.

and this...

24. Why is the margin on this loan higher than on other adjustable rate loans?

The margin on this loan may be higher than that of other loans because of the highly transactional nature of the product, which has a cost. However, most borrowers will find that the higher margin will have a minimal effect on the overall payoff timing, particularly when compared to the costs and lengthy payoff times for traditional loans.








Quote from DonCorleone:

It means the maximum rate increase the lender can impose is 5% over whatever rate it starts you at. For example, let's say you obtain the line of credit at 5.5%. Over the life of the loan, the highest rate the lender can impose on you is 10.5%(5.5% start rate + 5% maximum cap). Also, remember that this line of credit is based on 1-month LIBOR, which means if the LIBOR goes up next month you'll be screwed basically because not only will you have to pay the balance based on higher rate, your balance will increase according to the rate.

Thus, the slides in the presentation are borderline fraudulent because they compare the payoff schedule based on assumption that the rate for the line of credit loan will be fixed for the remainder of the life of the loan which is almost always not the case. When the fed lowers the rate, this type of loan can be tempting, but as you know the fed has been raising the rates for awhile now. In addition, loans like this impose early payment penalty which means if you decide to refinance before an agreed term, you'll have to pay additional % in order to close that line of credit. Be cautious and read all fine prints before signing your name.

Remember, if it's too good to be true...
More...
 
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