More and more empty nesters are finding that downsizing to a smaller home is a sound financial decision. When kids have left the house, you may realize that much of the space in your home is going unused. Downsizing to a smaller place that better suits your needs can free up some of the money you have invested in your home, giving you more financial freedom and more time to devote to whatever comes next in life.Read More
The Difference Between Residential and Commercial Loans
The majority of my previous two posts have focused on home loans and how the game isn't in our favor while most of the population is tuned out.
Guess what? It's the same in the commercial arena and no one notices it there either.
Here's the main difference between the two loan categories: Commercial loans will be amortized over a certain period, 20 or 25 years, for example. However, they typically require a balloon payment at some fixed point, way before the end of the amortization period. 10 years, for example.
Take that in to consideration for a moment.
In ten years, you either need to come up with all the money owed to the bank or refinance. At 10 years, you will have paid roughly 70% of the total interest owned on a 20 year loan. Time to refinance.
Do you see the scam?Read More
At the end of my last post, I asked the question:
If so much less interest is paid on a 15-year term versus a 30-year, why would the banks ever encourage you to take out that loan?
Let’s compare two loans, all things being equal except the term.
(click the links to download the pdf's of the amortization schedules)
$200,000 initial loan @ 4.5% interest
(Please note - I realize that you will normally get a better interest rate for a shorter term loan, but for this discussion we need to control all variables except one.)
On a 30 year loan, the total interest paid will be $164,813.42.
On a 15 year loan, the total interest paid will be $75,397.58.
That’s a difference of $89,415.85.
You would think the banks would hide a 15-year loan from consumers, wouldn’t you? Wouldn't they prefer you pay that huge interest amount on the thirty year loan?
Why don’t they?Read More
Smart People Saying Dumb Things
We’ve currently experienced the longest run of low interest rates in history. It’s got many smart folks saying dumb things. A college educated friend of mine says the current rates equate to “cheap money.”
While I agree that low interest rates are great for purchasing investment properties and spurring development, is it really “cheap money?”
Do you think banks would really loan “cheap money?” Before you answer, considered which entities usually have the largest buildings around: government, casinos and banks.
What is that telling you?Read More