Shawn bought a home with an adjustable rate mortgage. The margin on the loan is 2.7% and the rate cap is 7.2%?

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over the life of the loan. If the current index rate is 4.3% what is the initail interest rate of the ARM?

3 Comments
  1. Reply
    Noneya
    January 27, 2011 at 10:48 pm

    4.3 + 2.7 =7%

  2. Reply
    v b
    January 27, 2011 at 11:16 pm

    When you file a tax return, you have the option of itemizing. *IF* you can itemize your mortgage and property taxes, it would lower your taxable income and you would pay less tax. However, you only benefit to the extent the money is more than your standard deduction anyway. Plus if you lose your job, there is no tax benefit if you have no income….

    When they give you a price range like this ($ 300K to $ 380K), use the lower one.

  3. Reply
    Webhoo
    January 27, 2011 at 11:57 pm

    What I feel they are saying is the amounts are based on varying tax situations. You get tax benefits for owning a home and depending on your income bracket, how you have your taxes done,etc. will determine the benefit.

    You would have to ask a tax person that has looked at your situation to tell you your exact benefit.

    However this kind of calculator is what got allot of people in trouble financially. Usually people base their affordability on real dollars but this has you going “all in” to get a home because they are counting on your tax refund to help you.

    Normally people that buy based on their actual budget end up with a nice surprise at tax time where with this approach it taps that out and has you maxed out. I know this wasnt part of the question but be careful with this type of approach unless you have allot of money in reserves. Good Luck

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