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Personal Finances / Buying or Selling a Home


Subject:  Re: financing the next house Date:  2/17/2014  11:44 AM
Author:  Dwdonhoff Number:  126828 of 128883

Are they monthly caps, or annual caps? Is there a lifetime cap?
No limits. No caps.

No, no, no....

The program being referenced is serviced by Merrill Lynch Wealth Management, and funded by one of three sources (currently);
PHH Bank
Bank of America
Merrill Lynch portfolio

Its interest-only for 10 years, then amortized 15 years.
Its adjustable on monthly periods, with a lifetime cap of 12%, and periodic caps of 5%.

Max loan amount is 80% of appraised value, and max debt/income ratios are 50%, back end (housing plus consumer debt.)

Who is it good for?
Savers who already have a decent head start on accumulating their positive net worth, and who are financially aware that 'rates are relative' and rising rates have roughly parallel affects to both their outstanding leverage (mortgages) and their growth assets.

The working advantage between a 1.75% interest only loan, versus anything amortized, and either 30 FRM rates in the mid-to-high 4%s, or shorter FRMs with even heavier amortization burdens, is significant.

If someone had little to no working capital, but decent income and an aggressive saver mentality, then this program would be a moderate to low risk strategy to maximize savings when it counts.

For anyone who either has significant savings working already, and/or enough economic awareness to expect interest rates to be trapped in the deeply low range for years to come... this is a very low risk, high reward trade.

Dave Donhoff
Leverage Planner
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