Another mortgage gimmick or viable option?
Hey folks, been lurking on the forum for awhile. My wife and I are moving towards purchase on a Lynnwood home in late September. We'll be owning for the long-term, which means we want to be smart on financing.
I have contact with a few lenders. One, through Wells Fargo, held my last loan and has been a decent fellow the past 4 years. Recently he's gotten quite keen on a new way to pay off a mortgage, in a sense you have your savings and checking in an equity account of sorts. This helps pay down more interest than happens normally, supposedly saving years off of the loan. That's the theory at least.
Anyway, what better group of skeptics to bounce this idea off of! :twisted:
Here's the website, and I'm curious if you folks see it as a scam or viable alternative. Thanks for your thoughts!
http://www.u1stfinancial.net/ReplicatedDefault.aspx#
I have contact with a few lenders. One, through Wells Fargo, held my last loan and has been a decent fellow the past 4 years. Recently he's gotten quite keen on a new way to pay off a mortgage, in a sense you have your savings and checking in an equity account of sorts. This helps pay down more interest than happens normally, supposedly saving years off of the loan. That's the theory at least.
Anyway, what better group of skeptics to bounce this idea off of! :twisted:
Here's the website, and I'm curious if you folks see it as a scam or viable alternative. Thanks for your thoughts!
http://www.u1stfinancial.net/ReplicatedDefault.aspx#
Comments
As to the claim that you will pay off your mortgage early - that can only happen if your savings balance is a substantial proportion of the mortgage, I would imagine 10-20%. That would be the money that is not earning any other interest and of course is not invested. Of course, the way this deal is being pushed, I would expect that it would encourage people to spend their equity and increase their loan balance, actually increasing the length of time it takes to pay off the mortgage!
So if it's on good terms and you have good financial discipline, it may be a good thing to do. But something tells me the terms are not good at all, in fact, they don't mention any terms on their site.
Of course, it's just a gimmick. You are just taking from the left hand to give to the right. You're much better off opening a savings/checking account with BECU and getting actual interest on both accounts. It's just that then you would need to actively transfer $10 a month to the savings account.
Why do I mention that? This mortgage looks to me like the same type of deal. Just a gimmick. If I read it correctly, you have a mortgage and savings account through these guys. The interest from the savings account goes directly into the mortgage.
I just glanced at this, and you should get some better advice than mine, but you can generally make extra payments on your mortgage. It's just as effective to save your money separately and do it that way. What you really want is the highest interest rate on your savings and the lowest on your mortgage. My guess is this system grants you neither.
I agree, a gimmick, but for some people it's a very useful tool. I have friends that adjust the tip amount at restaurants/bars up to the next dollar plus 1 cent so that 99 cents is moved into their savings account. These are people that would otherwise not budget any money to save, so it works for them.
no need to fall for that loan program. Settle for a vanilla 30 year fixed loan. If you decide you want to !! pay of your loan in 20 years, make extra payments toward the PRINCIPAL balance of the loan.
HELOCS come with higher interest rates. The LO is trying to sell you something you don't need. Remember, LOs have no duty to put your interests above their own interest to make as much money as possible, no matter where they work, banker, broker, etc.
Obviously, the LO has signed up to sell some sort of "equity excelerator" software product that's used in conjunction with a HELOC. (home equity line of credit.) An LO often makes a double fee when there is a first mortgage and a second mortgage.
I recommend passing on this loan program, and this loan officer. An interesting experiment would be to see how hard he/she tries to sell you on the product once you say no.
It's a lot like going to the doctor was in the 1800's: all you knew was whatever the doc was telling you because he was the salesperson and advisor all rolled up into one.
In the finacial world they call that "moral hazard". We'll see exactly why over the next six months.
Lending is pretty simple. You borrow money from a big bank and lend it to J6P at a higher rate. It's a carry-trade of sorts.
Anything that makes it cheaper, is just shuffling the deck.
No closing costs? Higher interest rates.
Lower interest rates? Higher fees or neg-am
Making your equity a savings account? Risking losing your savings if your house tanks in value.
Guys, the banks are going to have a very bitter reality check in the near future. Be prepared.
Take Jillayne's advice. The program has been circling the lending industry in one form or another for months now. Even had some LO's stop by our escrow office in Mill Creek/South Everett to inquire if we could give them some leads, being that we have a very nice database of borrowers.
You can do essentially the same if you are fiscally disciplined.
-S-Crow
Legacy Escrow Service, Inc.
I swear I've heard that one before. On the Twilight Zone?