1% Mortgage Refinance - How?

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1 Mortgage Refinance - How? 1 Mortgage
Refinance loans, youve probably seen 100
different advertisements, but how is it
possible? There is really only one big secret to
1 mortgages 1 minimum payments are below the
interest payable on the loan. Once weve
addressed this feature, most of the other facets
of 1 mortgages are relatively logical. 1
mortgages, which now come in dozens of varieties
with start rates from below 1 (some even
starting at 0 for a few months after refinance)
up to 4 or more, offer astonishingly low
payments. Some of them offer fixed rates for 30
or even 40 years, some of them are adjustable
from the day you take them out, all of these are
basically 1 mortgages and are extremely
popular amongst homeowners today. 1 mortgages
and their offspring are being used for debt
consolidation, cash flow management,
investments, and for tax purposes, and they are
being used a lot. A full 40 of home loans
originated in 2005 and 2006 are estimated to be
from the 1 mortgage family, with multiple
payment options. By its proponents, the success
of the 1 mortgage has been hailed as a new era
of affordability and flexibility, of an extremely
sharp financial tool once available only to the
very rich now available to every family in the
country. Its opponents tend to think that the 1
mortgage is a bit too sharp for the average
homeowner to handle, they fear Average Joes
could conceivably cut themselves. Despite their
division, one thing is certain, the popularity of
the 1 mortgage is driven by the relentless
pursuit of the American dream. There are more
homeowners in the United States today than in
any other period in history, and many of those
who own homes have only been able to accomplish
home ownership, which was once a lifelong
achievement, in their early 20s and 30s,
largely because of the extended availability of
these 1 mortgages to normal borrowers. How much
less expensive is a 1 mortgage payment option
versus the comparable 30 Year Fixed traditional
principal and interest payment? For a
500,000.00 Mortgage 1 Minimum Payment
1200.00 Normal Loan Payment 3000.00 ---------
-------------------- Cash Flow / Savings
1800.00 Its easy to see why the 1 mortgage
refinance is so heavily marketed as a way to cut
your mortgage payment in half. In the above
example, the 1 mortgage minimum payment option
is 60 less than a typical, traditional principal
interest loan payment. 1 mortgage
minimum payments are usually 50 lower than even
the highly lauded Interest Only
2

• payment mortgages, and most loans in the 1
  mortgage family include the ability to pay more
  than just 1 if need be.
• So How Does it Work?
• In fact, 1 mortgages are more than just the 1
  start rate. They have a fully indexed rate as
  well, which is the true amount of interest due
  each month. When making a 1 mortgage minimum
  payment, the borrower is not paying all of the
  interest due, which is seen by some as a good
  thing and some as a bad thing. Lets examine some
  of the commonly perceived benefits and caveats
  of 1 mortgages
• Commonly Perceived Benefits of the 1 Mortgage
  Family
• Extremely Low Monthly Minimum Payment As weve
  seen in our example, the minimum payment option
  is less than half of the typical traditional
  mortgage payment.
• Flexibility to Control Your Own Money Unlike a
  traditional mortgage, which requires a payment
  to principal each month, 1 mortgages allow
  borrowers to take the power into their own hands
  to make principal payments when they want to, e.g
  after a bonus or a particularly good year.
• Separate Cash Flow from Equity While many
  personal finance pundits laud the benefits of
  building home equity, the reality is that
  investing home equity yields a 0 return on
  investment on a month to month basis. In the
  above example, paying the traditional principal
  and interest payment forces the borrower to
  invest 1800 more each month in their home,
  money which is locked up entirely in the equity
  of the home. Home Equity is illiquid, meaning
  all this money locked in equity cannot be
  accessed unless the home is sold or refinanced.
  The bank wont cut a check each month for the
  borrowers home equity in a traditional loan.
  With a 1 mortgage minimum payment, that 1800
  difference in payments is money in the
  borrowers pocket, to invest or spend at their
  discretion. By deferring interest using a 1
  mortgage, the borrower has full access to money
  that normally would be locked up until they sold
  the property. That 1800 per month adds up to
  over 100,000.00 in cash over 5 years on a 1
  mortgage, and its ava
• Maximize Debt Consolidation Using a 1 mortgage
  refinance to pay off all of your other
  creditors, such as credit card companies and high
  interest rate lenders, means that you can save
  even more money than with a 1 mortgage refinance
  alone. Since you arent throwing high interest
  money at your creditors each month, the cash
  which you save by making the 1 mortgage payment
  actually goes into your pocket, your savings,
  your investments, or wherever you need it most.
  Thats ultimate control. Lets say that in our
  500,000 1 mortgage example above, we rolled in
  30,000 of credit card and other high interest
  debt that have a monthly minimum payment
  requirement of 1,000. By using a 1 mortgage

refinance to pay off those debts, total monthly
savings using the earlier example would be
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• over 2800 per month, 1000 from the debt
  consolidation plus 1800 from the difference
  between the traditional loan payment at 6 and
  the 1 mortgage minimum payment.
• Turn Equity into a Tax Deduction First, the 1
  mortgage payment is 100 interest and therefore
  should be 100 tax deductible in most cases.
  Secondly, One of the most attractive benefits of
  1 mortgages is the additional tax deduction
  available on deferred interest. What this means
  is that borrowers can realize a tax deduction on
  interest they did not have to lay out the cash
  for, and choose the time at which this deduction
  is realized, which can be a huge savings upon
  liquidity or refinance. For real estate
  investors, this is a huge advantage as it can
  often wash out the capital gains consequences of
  selling a property. Disclaimer We do not
  dispense tax advice, and you should consider
  consulting a CPA.
• Easy Qualification Normally, to qualify for low
  payment mortgages, borrowers are required to
  have exceptional credit. However, 1 mortgage
  refinance loans are routinely available to
  borrowers with credit scores as low as 620, and
  if they are borrowing less than 80 of the value
  of their home, scores can even be in the 500s
  provided there are no late mortgage payments
  reported on their credit file. The borrowers
  income can be stated, and sometimes no income or
  employment documentation is required at all.
• Enhanced Protection from Foreclosure Because the
  minimum payment option is so low, the cash
  savings each month so high, and the loan is so
  flexible, the 1 mortgage family offers
  homeowners a low minimum payment option which
  they have a much higher likelihood of paying
  should they suffer an interruption of income or
  become disabled.
• Biweekly Payments A popular way to maximize the
  benefits of the 1 mortgage refinance is to
  elect to make biweekly payments (which are
  available on select 1 mortgages). This
  optimizes the loan to coincide with most
  borrowers payment cycles and reduces any
  possible negative effects of deferring interest.
• Commonly Perceived Caveats of the 1 Mortgage
  Family
• Artificially Low Payments Because the minimum
  payments are so low compared to traditional
  mortgages, many pundits fear that people who
  would normally not qualify for home ownership
  can now own a home. The fear is that new or low
  income homeowners could get in over their
  heads by buying more house than they can truly
  afford. Ultimately, it is up to the borrower to
  decide how much they can afford.
• Deferred Interest Often referred to as negative
  amortization, this concern is commonly cited by
  journalists as a negative because the loan
  balance may increase over time if the minimum
  payment is always selected. However, this
  perspective does ignore the advantages of
  dramatically increased cash flow in the
  borrowers pocket each month and the tax
  benefits of deferring interest. Of course, the
  borrower can choose for themselves whether they
  want to spend their money paying interest to the
  bank or if they would rather

put the difference into their own pockets.
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• Depreciation If the value of the borrowers home
  falls dramatically, and other factors force the
  borrower to sell the home while the value is low,
  the borrower may wind up owing
• more than the home is worth. This is a valid risk
  over short periods of time for all types of
  mortgages, not just 1 mortgages. Even a
  traditional principal and interest mortgage does
  not pay off enough principal over the first 5
  years of its life to offset a dramatic short term
  decline in home values. The risk of property
  values declining is a real risk of owning
  property, period. However, history tells us that
  residential real estate appreciates consistently
  over any given ten year period in the past 50
  years.
• Too Easy To Qualify This may not seem to be a
  disadvantage to most borrowers looking to
  purchase or refinance a home, but there are those
  who believe that borrowers should be forced to
  document significantly more income and assets to
  qualify for these types of loans. A lot of this
  sentiment is an outgrowth of antiquated
  conceptions of 1 mortgages as a Rich Mans
  Mortgage, which used to require significant net
  worth to obtain, and some of it is attributable
  to equally antiquated one size fits all notions
  about mortgages. Your perspective will likely
  depend on whether or not you are in a position to
  provide extensive documentation of your income
  and assets in support of your loan application.
• Many of the criticisms of 1 mortgages revolve
  around the adjustable rate variety of these
  mortgages, which like all adjustable rate
  mortgages go up and down with the rest of the
  market. However, in most 1 mortgages, the
  minimum payment stays fixed and can go up or
  down only 7.5 per year. So if your payment in
  Year 1 is 1000.00 , in Year 2 it can go no
  higher than 1075.00. Because the rate on the
  loan can change more or less than the minimum
  payment, which is extremely low, the loan can
  result in the deferral of interest if only the
  minimum payment is made. Many of the amortization
  issues which are seen by critics of 1 Mortgages
  as their key detractor have been recently
  resolved by the introduction of fixed rate
  minimum payment loans to the 1 mortgage family.
• Fixed rate 1 mortgage variations, the latest
  additions to the 1 mortgage family, have fixed
  interest rates from 3 to 30 years or more. The
  minimum payment option is generally available
  for the first 5, 10, 15 or in some cases 20 years
  of the mortgage, at which point the 1 mortgage
  payment recasts or readjusts to the interest only
  payment or the full principal interest
  payment. During the fixed period, the loan
  payment and interest rates of fixed 1 mortgages
  are utterly predictable and can be defined down
  to the penny. Many borrowers who would prefer a
  fixed rate can benefit significantly from the 30
  year fixed 1 mortgage, which actually carries a
  minimum payment of 1.95 and a fixed rates in the
  6 to 7 range for 30 years.
• While there are those in the journalism community
  who believe that 1 mortgages have too much
  power for your average homeowner, ultimately the
  decision is in the homeowners hands. Make a
  high payment to the bank each month, or put the
  money in their pockets. And homeowners seem
  evenly divided, as refinances into loans from the
  1

mortgage category are projected to represent over
50 of all refinances in 2007.
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Traditional mortgages are not a one size fits all
solution, and neither are 1 mortgages, but with
low minimum payment options, excellent debt
consolidation capabilities, significant cash flow
and tax advantages made possible by deferring
interest, and flexibility to control your
finances or insulate yourself from interruptions
in income or disability, 1 mortgages continue
to post significant growth across the country.
Whether or not a 1 mortgage refinance is right
for you should be determined by performing a
detailed analysis of your personal financial
situation with a home loan professional who has