1. Interest rates and more… Rebecca LeMaster

2. Agenda  Fixed Mortgages  Other Mortgage Options  Adjustable Mortgages  Balloon Mortgages

3. Fixed Mortgages MonthPaymentPrincipalInterestBalance 1 $599.55 99.55 500.00 $99,900.45 2 $599.55 100.05 499.50 $99,800.40 3 $599.55 100.55 499.00 $99,699.85 4 $599.55 101.05 498.50 $99,598.80 5 $599.55 101.56 497.99 $99,497.24 ………..……....……….…………. 356 $599.55 584.78 14.77 $2,368.52 357 $599.55 587.71 11.84 $1,780.81 358 $599.55 590.65 8.90 $1,190.17 359 $599.55 593.60 $5.95 $596.57 360 $599.55 596.57 2.98 $0.00 $100,0006%30 Year

4. Types of Mortgages - Options  Fixed  Adjustable  Balloon  Bullet  VA  FHA  Interest Only  Reverse

5. Adjustable Rate Mortgages (ARM)  Types: 1-year (1/1), 3/1, 5/1, 7/1, 10/1, 3/3, 5/5, 5/25…  Rate Adjustment Period  Initial Rate Period  Interest Rate Index (LIBOR, 1yr Treasury)  Margin Added to Index  Initial, Periodic and Lifetime Caps  Floor, Ceiling

6. ARM (5/1) $100,000 3% initial 30 Year 2.5 % marginIndex: 1 year LIBOR (5%) Caps: 5% initial, 2% annual, 5% lifetime, 3% Floor, 8% Ceiling MonthRate Index Payment Interest Principal Balance 13.0% 4.917% 421.61 250.00 171.61 99,828.39 23.0% 4.833% 421.61 249.57 172.04 99,656.35 33.0% 4.750% 421.61 249.14 172.47 99,483.88 43.0% 4.667% 421.61 248.71 172.90 99,310.98 53.0% 4.583% 421.61 248.28 173.33 99,137.65

7. ARM (5/1) Month Rate Index Payment Interest Principal Balance 61 6.417% 3.917% 595.68 475.40 120.28 88,785.71 62 6.417% 3.833% 595.68 474.76 120.92 88,664.79 63 6.417% 3.750% 595.68 474.11 121.57 88,543.22 73 5.583% 3.083% 551.64 406.74 144.90 87,274.53 74 5.583% 3.167% 551.64 406.07 145.57 87,128.96 75 5.583% 3.250% 551.64 405.39 146.25 86,982.71 85 6.583% 4.083% 603.02 469.81 133.21 85,502.26 86 6.583% 4.167% 603.02 469.07 133.95 85,368.31 87 6.583% 4.250% 603.02 468.34 134.68 85,233.63 97 7.417% 4.917% 646.11 519.09 127.02 83,860.74 98 7.417% 4.833% 646.11 518.31 127.80 83,732.94 99 7.417% 4.750% 646.11 517.52 128.59 83,604.35

8. Fixed or Adjustable? (Were you paying attention???) Which is a better deal? i.e. Which has a higher/lower cash outflow? Fixed: $193,255.20Adjustable: $204,807.39 Difference: $11,552.19 Who would want a fixed rate? Who would want an adjustable rate? Fixed: Older adults, planning to stay long-term Adjustable: Younger adults, not planning to stay long-term

9. Balloon Mortgages  Typically 5, 7 or 10 years  15, 20 or 30 year amortization period  Must be paid off or refinanced at end  Not common anymore  Often convertible, terms/conditions vary

10. Balloon Mortgage  Monthly payments, 30-year amortized, balance due at end of short time period  $100,000, 5%, 5 year (60 months) 1$536.82$416.67$120.15$99,879.85 2$536.82$416.17$120.65$99,759.20 3$536.82$415.66$121.16$99,638.04 4$536.82$415.16$121.66$99,516.38 5$536.82$414.65$122.17$99,394.21 Month Payment InterestPrincipalBalance 58$536.82$384.53$152.29$92,135.29 59$536.82$383.90$152.92$91,982.37 Balloon$92,365.63$383.26$91,982.37$0.00

11. Summary  Fixed Mortgages  Many Types of Mortgages  Adjustable Rate Mortgages  Balloon Mortgages

12. References  http://www.homeloanlearningcenter.com/mortgagebasics/mortgagetypes.htm http://www.homeloanlearningcenter.com/mortgagebasics/mortgagetypes.htm  http://www.usa.gov/topics/family/homeowners/buyingselling/mortgages/types.shtml http://www.usa.gov/topics/family/homeowners/buyingselling/mortgages/types.shtml  http://www.mortgagecalculator.org/helpful-advice/types-of-mortgages.php http://www.mortgagecalculator.org/helpful-advice/types-of-mortgages.php  http://www.isoldmyhouse.com/fsbo/mortgage-types.cfm http://www.isoldmyhouse.com/fsbo/mortgage-types.cfm  http://www.investopedia.com/university/mortgage/mortgage4.asp http://www.investopedia.com/university/mortgage/mortgage4.asp  http://www.usa.gov/topics/family/homeowners/buyingselling/mortgages/types.shtml http://www.usa.gov/topics/family/homeowners/buyingselling/mortgages/types.shtml  https://www.lendingtree.com/mortgage/arm-interest-rate-caps-article https://www.lendingtree.com/mortgage/arm-interest-rate-caps-article  http://www.mtgprofessor.com/Calculators/Calculator7b.html http://www.mtgprofessor.com/Calculators/Calculator7b.html  http://www.mortgagecalculator.org/helpful-advice/types-of-mortgages.php http://www.mortgagecalculator.org/helpful-advice/types-of-mortgages.php  http://en.wikipedia.org/wiki/Adjustable-rate_mortgage http://en.wikipedia.org/wiki/Adjustable-rate_mortgage  http://www.bankrate.com/calculators/mortgages/mortgage- calculator.aspx?MSA=6442&MSA=6442&MSA=6442&MSA=6442 http://www.bankrate.com/calculators/mortgages/mortgage- calculator.aspx?MSA=6442&MSA=6442&MSA=6442&MSA=6442  http://tcalc.timevalue.com/all-financial-calculators/mortgage-calculators/balloon-mortgage- calculator.aspx?PRINCIPALAMOUNT=100000&DOWNPAYMENTAMOUNT=0&DOWNPAYMEN TAMOUNT_TYPE=Percent&TERM=30&TERM_UNITS=Years&BALLOONPAYMENTAFTER=5 &BALLOONPAYMENTAFTER_UNITS=Years&INTERESTRATE=5.0%25&COMPUTE=COMPU TE&SHOWAMORTIZATIONSCHEDULE=on&CALCULATORID=HF04&HIDEFORMTAG=TRUE &TEMPLATE_ID=www.timevaluecalculators.com_1&PostBack=true#results  http://ncacu.org/borrow/mortgages/#balloon http://ncacu.org/borrow/mortgages/#balloon  http://rws.rwstools.com/templateroot/Articles/LoanPrograms.asp?ArticleID=1026&pvlid=5062& http://rws.rwstools.com/templateroot/Articles/LoanPrograms.asp?ArticleID=1026&pvlid=5062&  http://math.info/Misc/Amortization_Formulas/ http://math.info/Misc/Amortization_Formulas/

13. Questions???