|
Other Mortgage Articles
|
Matt Killikelly's
Mortgage Answers for Consumers:
- Divorce Buyout: What
You Need To Know
As a twelve-year veteran of the mortgage industry I’ve helped clients with hundreds of divorce home buyouts. During that time I’ve learned that this often complicated process can be treated overly casually by judges, mediators and attorneys. (May 2007).
- Changes
in Bankruptcy Laws
With the new bankruptcy law in force this
fall and credit card companies virtually
doubling their minimum payments within the
next few months, a major shift in American
personal finance has arrived. (January 2006).
- Which
Loan is Best For Me?
With the dizzying array of loans available
to choose from consumers are faced with
a difficult choice when selecting which
mortgage loan is right for them. (October 2005).
- Should
Borrowers Pay Points?
Many borrowers ask the question: Is it in
our best interests to pay upfront points
when buying or refinancing a home? Short
answer: it depends. There is no hard and
fast rule. (July 2005).
- A
Realtor's Most Valuable Alliance
Realtors are faced with a complex sale,
and sometimes get so involved in selling
that a very important fact gets overlooked:
nearly every sale requires a mortgage. (April 2005).
- What
is a "bi-saver"?
A bi-saver takes an existing loan and essentially
forces the borrower to pre-pay principal
toward a loan in order to shorten the term. (March 2005).
- The
Qualifying Process
In the case of a loan the qualifications
and history of the borrower, the amount
of investment by the borrower and even property
type and occupancy status of the property
being collateralized are weighed to determine
a unique risk profile for each loan. Every
aspect of the transaction is carefully considered
before a bank makes any solid offer for
interest rate or closing fees. (February 2005).
- How
to Avoid PMI (Private Mortgage Insurance)
PMI insurance can cost hundreds of dollars
per month. Fortunately, there's a less known
and, in my opinion, an underutilized method
to accomplish the same objective that costs
far less. (January 2005).
|
|
March,
2005 - What is a Bi-Saver Mortgage? |
What
is a Bi-Saver Mortgage?
by Matthew
Killikelly
A bi-saver takes an existing loan and essentially
forces the borrower to pre-pay principal toward
a loan in order to shorten the term.
There are two issues I do not like about bi-savers.
First, bi-savers usually have a fee attached,
anywhere from $200-$600 yearly for the servicing.
The second issue is the way they are sold --
most customers don't realize that it's not the
fact that the payments are made bi-weekly that
makes them save more, it's the fact that by
paying bi-weekly the client actually pays more
money towards their mortgage over the year and
that's what makes the savings.
In essence the bi-saver simply forces a customer
to pre-pay a loan using their own money, something
they can do on their own. The rub is that the
bank charges to do this. In reality, any customer
can do this themselves without any expense just
by adding a small amount to their regular payment.
Here's what I mean:
Normal payment
Normal monthly payment $1000
Normal year = $1000 x 12 payments = $12,000
in mortgage payments made
Bi-saver
Bi-saver payment $500 every two weeks
Bi-saver year = $500 x 26 payments = $13,000
in mortgage payments made Cost: $200-$600
Voluntary pre-payment
Voluntary customer pre-payment of $84 per month
= $1084 monthly payment
$1084 x 12 payments = 13,008 in mortgage payments
made
No additional cost to borrower and 12 regular
payments made.
My main reason why I dislike bi-savers is the
way they are sold to customers. The bank is
not explaining that what the bi-saver does is
simply make a customer pay more. Is there benefit?
Yes. But, the same benefit can be obtained without
a cost to establish. In my mind, if customers
knew what I know, the bi-saver would simply
not exist, at least not with a charge attached. |
|
