Walk a Kb or Two in my Moccasins- Nobody 'splained it to me like that!

Simple answers to Complex Questions and Complex Answers to Simple Questions. In real life, I'm a Greater-Toronto (Canada) Realtor with RE/MAX Hallmark Realty Ltd, Brokerage. I first joined RE/MAX in 1983 and was first Registered to Trade in Real Estate in Ontario in 1974. Formerly known as "Two-Finger Ramblings of a Forensic Acuitant turned Community Synthesizer"

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- Realtor (2nd or 3rd best you'll likely run into)
- Philosopher King of Real Estate Business in Ontario (self-assessed)
- Likes Public Policy & Governance Discussions
- Likes discussion on being an "Attestant" and First-Century Ecclesias(aka 'primitive congregations)

Tuesday, July 17, 2012

Variable Rate Mortgage Borrowing "For Free" (i.e. on a net basis)

The concept of borrowing using a variable rate mortgage money at less than the rate of inflation (hence the "for free" comment) is a "sleep at night" situation.

If you're confident that over the term of the mortgage you'll be paying less interest on the variable loan than you would be compared to the same term in a fixed rate AND can sleep at night without fretting ... it's a great deal -some would say that since it's inception in Canada in the early 1980's, the Variable Mortgage has been the BEST option for sophisticated, experienced homeowners.

A ridiculous example was on Bloomberg - ridiculous because the borrower has no "need" for financing - he's a billionaire .... but he's borrowing 'for free' and so would be a fool not to do so

Zuckerberg’s Loan Gives New Meaning to the 1%

By John Gittelsohn and Dakin Campbell - Jul 16, 2012 12:00 AM ET
Bloomberg OnLine

excerpted ...

Billionaire Mark Zuckerberg is giving new meaning to the term “the one percent.”

The Facebook Inc. (FB) founder refinanced a $5.95 million mortgage on his Palo Alto, California, home with a 30-year adjustable-rate loan starting at 1.05 percent, according to public records for the property.

While almost all lending rates have reached historical lows this year, the borrowing costs available to high-net-worth individuals are even lower if the person is willing to bear the risk of monthly interest rate adjustments, said Greg McBride, senior financial analyst with Bankrate Inc., a North Palm Beach, Florida-based firm that tracks interest rates. Large increases are unlikely anytime soon with the Federal Reserve signaling it will keep interest rates near zero for at least two years.

When you can borrow at a rate below inflation, you’re borrowing for free,” McBride said in an e-mail. “This is the concept of using other people’s money and it preserves financial flexibility for the borrower.” (emphasis added)

...

Zuckerberg, 28, is the world’s 40th wealthiest person, with a net worth of $15.7 billion, according to the Bloomberg Billionaires Index. His company went public in a $16 billion initial public offering in May. The shares were down 19 percent since trading began as of July 13.

.....

Same Day -slightly different aspect of Lending to Homeowners (a gov't bailout scheme)

Obama Home Refinancing Effort Hits Banks’ Risk, Capacity Limits


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