Saturday, October 20, 2018
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Randi F. Rainmaker
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Gooder Group
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Fairfax, Virginia 22031

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What are some other creative loan options I might want to consider?

Crayon Drawings AIM Mortgage Doubles Value Of Down Payment
How would you like to spend your money and save it, too? The Asset Integrated Mortgage, or AIM, lets you do just that.

A home buyer with an AIM loan invests part of the down payment in a life insurance annuity set up by the lender, and draws tax-deferred interest. The minimum is 10% down with 5% of it for the annuity; but if the down payment is 20%, up to 15% can be invested in the annuity, yet counted as collateral, so private mortgage insurance is unnecessary.

Currently, lenders in at least 50 cities offer AIM loans. For more information, contact Fannie Mae at (800) 732-6643.
A GEM Of A Mortgage Loan
GEMs (growing equity mortgages) are making a comeback in the world of creative financing. Their early-1980s popularity gave way to ARMs (adjustable-rate mortgages). Their return to the scene was prompted by declining interest rates.

GEMs have the advantage of being fixed-rate loans with interest rates as low as (or lower than) the lowest ARM rates. Typically, a GEM has a fixed, 30-year rate that approximates the market rate at the time the loan is taken out. The payment for the first year of the loan, however, may be set at a much lower rate – interest only. The payment for the succeeding 2-8 years increases at an agreed-upon rate, typically 3%-7.5% per year, until your monthly payment reaches a specific level for the remainder of the loan.

As your payments increase on schedule, they will become more than the regular note rate. Then your "overpayments" go toward reducing the principal on the loan. You thereby shorten the life of the mortgage. That's why, although figured on a 30-year basis, most GEMs are paid off in 15 to 20 years. That's a way of building equity fast, once you get past the period paying only interest.
Biweekly Mortgages: A Good Value?
One of the newer twists in the mortgage industry is biweekly mortgages. Here’s a quick look at how they work.

For an up-front, non-refundable fee – typically several hundred dollars – the mortgage servicer will debit the homeowner’s bank account every two weeks – 26 times a year. This amounts to making an extra month’s payment each year.

The benefit for the mortgage servicer is they have the use of your funds without paying interest until they apply your payment to the mortgage at the end of the month. The benefit to the consumer is paying off principal debt and increasing home equity faster.
A word of caution, though. Before you jump on the biweekly bandwagon, remember to:
  • Comparison shop for the lowest start-up fee; they vary widely.
  • Figure out how long you’ll have this mortgage. If you’re planning a move or refinance soon, you will have to pay a new start-up fee for a biweekly payment schedule unless your program is transferable.
  • Shop for a program that pays you market interest rates on your money while it is in the mortgage servicer’s hands, prior to being credited to your mortgage balance. Beware of biweekly mortgage scams from non-reputable firms.
  • Deal only with experienced, reputable companies. Ask your lender for full details.
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