Re: Re: Re: Re: Re: Re: Re: Are primerica's home loan rates inflated?

Subject: Re: Re: Re: Re: Re: Re: Re: Re: Are primerica's home loan rates inflated?

Comments:
: As I was hitting "post" I remembered one more little dirty trick they tend to play. : When you are looking over the bi-weekly, they try to mislead you into thinking that your monthly payment is equal to 2 times the biweekly/semi-monthly payment. : So, for example, if your biweekly is $500..they'll mention that your "first month" is $1000, or that your monthly payment is "about $500". Well, you pay 1000 in Jan, Feb, Mar, Apr, but then May comes along and all of a sudden you have THREE of those $500 payments due! : If you average it out, your monthly payment is really 2 times a biweekly PLUS 1/6 of a biweekly payment. So in the case above, your monthly payment is REALLY more like $1090....just one more way they will fudge numbers here and there to make you think you're paying "another $100 less" per month. : : : Within 1% is good...I've never seen a PFS loan that close to the market. : : First, to the "savings" over the life of the loan. With the accelerated payments, you simply added an extra payment per year to the loan. You can do that with any loan by applying 1/12 of an extra payment per month and telling your lender to apply it to the principle. By paying that extra money "today" you avoid having to pay it "in the future". All that it is -- don't let PFS fool you into thinking it's different -- is money compounding at the rate of the loan. So if you pay an extra $1000 the first year, you will have 'saved' about (very very simply put P*(1+note rate)^30)=ABOUT $10000 over the life of the 30-year loan. That's all it is. But let's say you didn't pay that extra toward your principal - and instead invested that $1000 at a decent interest rate of 10% which is certainly attainable over that 30 years. Now, YES, you paid your bank $10,000 in interest that you could have 'saved'. BUT you earned via investments (same formula) about $13000!. So you're ahead $3000. It has been said that your mortage is the best money you will ever borrow because it's so darn cheap!! If you can invest at a higher rate of return than your mortgage rate, then it is worthwhile to do it. So, in your case, you may have saved that interest, but perhaps at a higher opportunity cost. : : 2) Now for the supposed lower payments per month. First, if you have <20% equity in your home, you probably paid PMI. PFS removes this, and that _IS_ an advantage. So you save about 40 or 50 bucks per month. BUT you only save this money until you have 20% equity in your home at which time the lender should remove PMI upon your request. Now, when PFS does their little comparisons, they make it seem like you will be paying that extra PMI for the entire life of the loan, which simply isn't true. : : Second, PFS tries to make you believe that your more frequent payments are saving you money. Not the extra payment per year, but the more frequent payments, due to their "simple interest" bullsh**. I already showed you that the "simple interest" facet does save you money - a tiny $114 over 30 years on a 100K, 8% loan. They mix that with the extra monthly payment to make you think their loan is so special. The PFS simple interest is like a car dealer throwing in a free cupholder after screwing you for rustproofing. Yes, the cupholder has some value, but AT WHAT COST???? : : Third and most important in your case, PFS plays a sleazy little trick with their escrow, or lack of it. It may be to your slight advantage to invest your escrow money yourself. Be honest with yourself, though, you are not going to get the phenomenal 15% returns that PFS promises, especially in the short term. Chances are you are going to invest that escrow money (which normally goes for taxes/insurance) in a low-rate place like a money market at get 3-4% on it. If you're lucky, you'll earn about 30 dollars a year. But here's the trick - because you are not including an escrow payment in your monthly mortgage payment, PFS pretends like you are actually SAVING all that money. For example, if your escrow is normally $150 a month, PFS says "with us you're saving $150 a month". In reality, that's totally bogus!! That money is eventually going to go to either the government for taxes, or for hazard/flood insurance. You are saving it short-term, and really only saving MAYBE $2-3 a month, if you're lucky. That's the difference. And it's really hard for PFSers to understand that just because you don't write THEM a check for your hazard/taxes that you don't have to write it at all. : : I can only guess at the tricks they pulled on you, but I do know, and you will get the same answer from a financial professional if you choose to ask - that with a higher interest rate on the same loan balance, your monthly P&I will always be higher. Period. You can structure the payments whatever way you want..you can juggle upside down while drinking a glass of milk if that floats your boat -- but no matter what you do, NOTHING will change how much you owe "tomorrow" without that opportunity cost "today". Remember these three points and I think it will be clear. : : : : : : : Ok...but my payments after a SMART loan with PFS decreased as did the time I will pay it all off.$260 and approx 5yrs. I was on accelerated bi-weekly at the bank and it is the same now. I had the bank give me run-down of the interest paid over the life of the mortgage and the numbers were less with PFS. Closing costs and the appraisal fee were also included with the SMART loan as well. My interest rates were close(1% difference at the time) So look at my situation and tell me if I made the correct decision. I think I did. I saved money every month and I am paid off sooner... which is the ultimate goal. : : : Jim : : : : : : The interest rate will not have an effect on the life of the loan, per se, but on the monthly payment required for a set term. : : : : The differences might have a lot of reasons. For a given principal amount and rate, the amount per month wihtout any sort of "equity builder" (biweekly) setups, the payment per month should be the same. If they are different, you are right -- it might be a percentage of an interest point. Other reasons? One of the banks (for example, Primerica) may have 'rolled' closing costs into the loan. In effect, you've still purchased the same amount of house (principal) but your loan amount is higher which translates to higher payments. The bank may also go with another private morgtage insurer. While their rates are rather close, a small dollar figure could be attributed to that. Another may require a higher balance in an escrow account if your loan is the type that requires escrow. : : : : So there either has to be either : : : : (1) SOME difference in your principal if the interest rates are exactly the same. All loans of the same amount and term (again, without equity builder-type crap) are amortized according to the same schedule and thus the same amount of principle/interest is applied for each loan : : : : OR : : : : (2)another one of your payments (escrow/PMI/something) has to be affecting your payment amount : : : : : : : : : : : : Also take a look at the amount going to the : : : : principle. Check the banks out. Why is it at one bank...lets say Toronto Dominion...the interest rate is 5% and the payment is $500 per month. You then walk across the street to CIBC where the interest rate is still 5% but your monthly payment is $520. It depend on the percentage that goes on the principle and the slightest change even if it a third or fourth decimal point can make a large difference on the life of the loan. : : : : : Jim : : : : : : : : : : : 1. The greatest difference between Primerica's loans are in the way interest is calculated on their loans versus the magority of lenders. Primerica uses a simple interest plan that re-amortizes the loan twice a month. The majority of lenders use a scheduled interest plan and only re-amortize the loan once every 360 days. Primerica's rate may be a little higher, but the majority of the time, the amount of interest paid on a comparable Primerica loan is much, much less. : : : : : : : : : : : : To be exact, if you don't make extra payments, Primerica's "simple interest" saves you nothing. : : : : : : If you pay "half as much twice as often" to take advantage of the so-called simple interest, you will save (drumroll) $114 over the life of a $100,000, 8% interest rate loan. : : : : : : You could go bi-weekly with Primerica like you could with any other lender. That way, you'd be spending "today" money to avoid spending "tomorrow" money; that is, money with interest applied. : : : : : : And, a "little higher"?? You call TWO PERCENTAGE POINTS a "little" higher??????? : : : : : : : : : : : : : : : : : : : : 2. Primerica's closing rates are generally lower than other lenders. The cost for an appraisal may only cost the lender $125, but some firms will increase the number as they see fit, and increase their profit. : : : : : : : : : : : : FUNNY!!! This is another underhanded tactic used by PFS. While you pay a *whopping* 3% in discount points, PFS doesn't include this in their definition of closing costs. They only include origination points. So while you have to pay an extra, say $3-5000 upfront, it doesn't technically belong under "closing costs" per Primerica's definition. : : : : : : As for the other junk costs, PFS was as high or higher than any other lender I've ever seen. : : : : : : : : : : : : : 3. From what I've seen, Primerica's life insurance rates are very competeive. : : : : : : : : : : : : From what I've seen, they're not, if you compare term to term.

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