From: "Jeff Strickland" 
Newsgroups: alt.org.natl-assn-mortgage-brokers
Subject: Re: Newbie Q about fixed interest rates and 20 yr amortization loan
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Date: Fri, 23 Mar 2007 00:58:56 GMT

We do not know what your qualification is on the loan -- income vs debts --  
and that may be playing a role here.

A 3yr Fixed on 20 means the loan payments will be amortized over 20 years, 
and will be fixed for the first three. I assume the rate will go adjustable 
after that.

You didn't say what your participation -- down payment -- would be, but I 
agree with you that 9.25% sounds a bit steep. I'm not certain, but you 
should be able to get a 10yr Interest Only based on a 30yr amoritization 
with a better rate than that. Again, your qualification and participation 
would play a huge role in the rate you get.

Any loan can be paid off early. You have to keep it longer than the 
prepayment penalty period, normally 3 or 5 years, but after that, you can 
pay the loan off whenever you want. All you must do to avoid the prepayment 
penalty is to NOT pay more than 20% of the outstanding balance in any of the 
first three years. Except for refinancing, most of us will never run up 
against the prepayment penalty by making overpayments on principle.

Loan payments are allocated thusly, first, they collect any interest that is 
due, then they collect any impounds that must be collected, then they write 
down principle. If you have a regular payment of say $1500, and you make a 
payment of $2000, then $500 EXTRA dollars will be written down from the 
outstanding principle. The interest due assumes interest on principle from 
the start date, so if you pay off massive chunks of principle early, then 
you save interest on the back end of the loan because the term becomes much 
shorter. All you need do is avoid paying 20% of the outstanding PRINCIPLE in 
any year where the prepayment penalty is in affect.

You are right, a 10yr note should have a better rate than a 20yr note. But, 
even with the lower rate, the payment could upset your ratios -- income vs 
debts -- that I discussed earlier. I plugged some random numbers into my 
payment calculator, and all things (rate and loan amount) being equal, the 
difference in payment between 10- and 20- year amoritizations is roughly 
$600 a month.






 wrote in message 
news:1174602612.269809.229050@y66g2000hsf.googlegroups.com...
> Hello,
>
> I have an offer accepted on some investment property that I would like
> to buy.  I sent the offer to purchase to my bank and they came back
> and said I was approved for a 3 year fixed 20 year amortization loan
> at 9.25% interest rate.  I orginally asked for a 10 year loan with the
> option to pay off the loan early.  I think the interest rate is very
> high and the 20 year amortization can possibly change the interest
> rate.  Can someone offer me advice?  Thanks.
>