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Mortgage Designs

Interest rates and more… Rebecca LeMaster. Mortgage Designs. Agenda. Fixed Mortgages Other Mortgage Options Adjustable Mortgages Balloon Mortgages. Fixed Mortgages. $100,000 6% 30 Year. Month Payment Principal Interest Balance 1 $599.55 99.55 500.00 $99,900.45

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Mortgage Designs

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  1. Interest rates and more… Rebecca LeMaster Mortgage Designs

  2. Agenda • Fixed Mortgages • Other Mortgage Options • Adjustable Mortgages • Balloon Mortgages

  3. Fixed Mortgages $100,000 6% 30 Year MonthPayment Principal Interest Balance 1 $599.55 99.55 500.00 $99,900.45 2 $599.55 100.05 499.50 $99,800.40 3 $599.55 100.55 499.00 $99,699.85 4 $599.55 101.05 498.50 $99,598.80 5 $599.55 101.56 497.99 $99,497.24 ……….. …….... ………. …………. 356 $599.55 584.78 14.77 $2,368.52 357 $599.55 587.71 11.84 $1,780.81 358 $599.55 590.65 8.90 $1,190.17 359 $599.55 593.60 $5.95 $596.57 360 $599.55 596.57 2.98 $0.00

  4. Types of Mortgages - Options • Fixed • Adjustable • Balloon • Bullet • VA • FHA • Interest Only • Reverse

  5. Adjustable Rate Mortgages (ARM) • Types: 1-year (1/1), 3/1, 5/1, 7/1, 10/1, 3/3, 5/5, 5/25… • Rate Adjustment Period • Initial Rate Period • Interest Rate Index (LIBOR, 1yr Treasury) • Margin Added to Index • Initial, Periodic and Lifetime Caps • Floor, Ceiling

  6. ARM (5/1) $100,000 3% initial 30 Year 2.5 % margin Index: 1 year LIBOR (5%) Caps: 5% initial, 2% annual, 5% lifetime, 3% Floor, 8% Ceiling Month Rate Index Payment Interest Principal Balance 1 3.0% 4.917% 421.61 250.00 171.61 99,828.39 2 3.0% 4.833% 421.61 249.57 172.04 99,656.35 3 3.0% 4.750% 421.61 249.14 172.47 99,483.88 4 3.0% 4.667% 421.61 248.71 172.90 99,310.98 5 3.0% 4.583% 421.61 248.28 173.33 99,137.65

  7. ARM (5/1) Month Rate Index Payment Interest Principal Balance 61 6.417% 3.917% 595.68 475.40 120.28 88,785.71 62 6.417% 3.833% 595.68 474.76 120.92 88,664.79 63 6.417% 3.750% 595.68 474.11 121.57 88,543.22 73 5.583% 3.083% 551.64 406.74 144.90 87,274.53 74 5.583% 3.167% 551.64 406.07 145.57 87,128.96 75 5.583% 3.250% 551.64 405.39 146.25 86,982.71 85 6.583% 4.083% 603.02 469.81 133.21 85,502.26 86 6.583% 4.167% 603.02 469.07 133.95 85,368.31 87 6.583% 4.250% 603.02 468.34 134.68 85,233.63 97 7.417% 4.917% 646.11 519.09 127.02 83,860.74 98 7.417% 4.833% 646.11 518.31 127.80 83,732.94 99 7.417% 4.750% 646.11 517.52 128.59 83,604.35

  8. Fixed or Adjustable?(Were you paying attention???) Which is a better deal? i.e. Which has a higher/lower cash outflow? Fixed: $193,255.20 Adjustable: $204,807.39 Difference: $11,552.19 Who would want a fixed rate? Who would want an adjustable rate? Fixed: Older adults, planning to stay long-term Adjustable: Younger adults, not planning to stay long-term

  9. Balloon Mortgages • Typically 5, 7 or 10 years • 15, 20 or 30 year amortization period • Must be paid off or refinanced at end • Not common anymore • Often convertible, terms/conditions vary

  10. Balloon Mortgage • Monthly payments, 30-year amortized, balance due at end of short time period • $100,000, 5%, 5 year (60 months) Month Payment Interest Principal Balance

  11. Summary • Fixed Mortgages • Many Types of Mortgages • Adjustable Rate Mortgages • Balloon Mortgages

  12. References • http://www.homeloanlearningcenter.com/mortgagebasics/mortgagetypes.htm • http://www.usa.gov/topics/family/homeowners/buyingselling/mortgages/types.shtml • http://www.mortgagecalculator.org/helpful-advice/types-of-mortgages.php • http://www.isoldmyhouse.com/fsbo/mortgage-types.cfm • http://www.investopedia.com/university/mortgage/mortgage4.asp • http://www.usa.gov/topics/family/homeowners/buyingselling/mortgages/types.shtml • https://www.lendingtree.com/mortgage/arm-interest-rate-caps-article • http://www.mtgprofessor.com/Calculators/Calculator7b.html • http://www.mortgagecalculator.org/helpful-advice/types-of-mortgages.php • http://en.wikipedia.org/wiki/Adjustable-rate_mortgage • http://www.bankrate.com/calculators/mortgages/mortgage-calculator.aspx?MSA=6442&MSA=6442&MSA=6442&MSA=6442 • http://tcalc.timevalue.com/all-financial-calculators/mortgage-calculators/balloon-mortgage-calculator.aspx?PRINCIPALAMOUNT=100000&DOWNPAYMENTAMOUNT=0&DOWNPAYMENTAMOUNT_TYPE=Percent&TERM=30&TERM_UNITS=Years&BALLOONPAYMENTAFTER=5&BALLOONPAYMENTAFTER_UNITS=Years&INTERESTRATE=5.0%25&COMPUTE=COMPUTE&SHOWAMORTIZATIONSCHEDULE=on&CALCULATORID=HF04&HIDEFORMTAG=TRUE&TEMPLATE_ID=www.timevaluecalculators.com_1&PostBack=true#results • http://ncacu.org/borrow/mortgages/#balloon • http://rws.rwstools.com/templateroot/Articles/LoanPrograms.asp?ArticleID=1026&pvlid=5062& • http://math.info/Misc/Amortization_Formulas/

  13. Questions???

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