Category Archives: Home Mortgage
Option Arm (Page 1 of 2)
An ARM offers low adjustable interest rates with the security of a fixed minimum payment. With ARMs, you have four different payment options each month. ARM mortgages give you flexibility that is unmatched by virtually any other home loan product available in today’s market. If your budget is a bit tight, you can choose to make the interestonly payment or the minimum payment: two payments that are lower than a standard mortgage payment. In months when your budget is not so tight, you can use the extra money toward saving for retirement, paying off highinterest debt, making home repairs, or financing college expenses.
An option ARM program calculates your minimum payment based on your interest rate minus a percentage for the first five years until it reaches the maximum deferred interest level of about 115 percent. During the first five years, your rate is fixed. After that, it becomes a sixmonth fully amortizing ARM. When that happens, the loan loses its potential to be a negatively amortizing loan. If you are looking into getting an option ARM, look for one that limits the potential for deferred interest or negative amortization. The minimum payment on Option ARM mortgages is the lowest of the four payment options, since it is less than the amount needed to cover the interest for the month. This is known as deferring your interest.
Remember that flexibility makes an option ARM mortgage a great choice for borrowers who don’t have a fixed income or for people with fluctuating income-like people who work on commission or selfemployed borrowers; even people who are serious investors who want to channel their money into their investments, rather than their mortgage. Without a fixed income, it can be hard to meet a mortgage payment on time during slow months at work. Say you have a bad month of commission-sales are down; you have to fix your car; and finances are tight. With an Option ARM loan, you can choose to make just the minimum payment to get you through the month, and then make a larger payment when things pick up. However, this loan might be perfect for someone who is in sales and works on commission and who knows how to get by when sales are down. This is not the kind of loan for people who may have lots of debt and are looking to pay the minimum payment all the time.
The minimum payment on Option ARM loans may not fully cover the interest that accrues monthly. If the minimum payment does not cover the entire interest owed, it gets tacked onto your loan balance which means you can get into trouble very quickly, if you don’t know what you’re doing. Your loan balance can actually increase as you make these low payments. You can elect to use the minimum payment as often as you like, but if used too often without making some larger payments in between, you could end up with a mortgage balance that is higher than the value of your home. Quicken Loans offers an option ARM mortgage with a minimum payment that limits how much interest is deferred.
Student loan (Page 1 of 2)
DEFINITION
A loan is a debt, which entails the repartition of financial assets over time, between the lender and the borrower. The borrower receives an amount of money from the lender, which should be paid back to the lender. The cost of the service depends on interest on the debt. Student loan is a loan offered to students to assist in payment of professional education. It doesnt matter if you are graduate or undergraduate student. You can borrow money in all cases. Parents may also borrow to pay the cost of education for dependent undergraduate students. Maximum loan amounts depend on the student’s year in college. These loans usually carry lower interests than other loans and are usually offered by the government. Often they are supplemented by student grants which do not have to be repaid.
THE POINT
The cost of professional education rises every year that is why today, student loans are a fact of life. The key role belongs to the government as in any government sponsored program. While included in the term “financial aid” professional education loans differ from scholarships and grants in that they must be paid back. Student loans provide a variety of postponement options and extended repayment terms and do not require credit checks or collateral. The federal funds for education are limited and government and private lenders give the students flexibility in choosing the type of college that is right for them.
CATEGORIES OF STUDENT LOANS
There are different types of student loans that are available. They include:
Stafford Loans: Stafford Loans are issued by the federal government. They have a lower interest rate than other types of loans. There are either subsidized and/or unsubsidized Stafford Loans. When you take subsidized loan, the government pays your interest for you while you are studying. Subsidized loans are based on financial need. With unsubsidized loans, you will be charged interest while you are studying, but do not have to begin paying the loan until you graduate college. Unsubsidized loans are available without showing financial need. You must begin paying back these loans 6 months after you graduate.
Direct Student Loans (Perkins Loans): Perkins loans are given to students based on extreme financial need, and usually have very low interest rates. The interest rate is lower than a Stafford. Since the college already has been given its Perkins funds, it simply transfers the loan to your student account as a credit. You have to begin paying between 6 and 9 months after you graduate.
Subsidized Direct Loans: Direct loans are the same as a Stafford except that the federal government is the lender.
PLUS Loans: This is a parent loan, offered by the federal government that is unrelated to need. Generally, parents can borrow up to the total cost of education, minus any aid received. These loans are given regardless of your income, but lenders will consider your credit history. The interest is low on this type of loan and repayment usually begins within 60-90 days after full disbursement of the loan, or after the student graduates.