Sunday, March 07, 2004

Adjustable Rate Mortgages Erroneously Dissed

Atrios, in a post titled “Has He Gone Insane?," states that he is a ”...little scared.  More than a little scared, actually.” What is he scared of?  Well, he’s scared because Alan Greenspan has recently stated that borrowers showed opt for adjustable rate mortgages (ARMs) rather than fixed rate mortgages (FRMs).  Atrios’ post points to a Bill Fleckenstein article at MSN Money titled “Don’t take mortgage advice from Alan Greenspan." Fleckenstein alludes that Greenspan’s advice to opt for an ARM is "reckless behavior."

Let’s consider this.  I, at one time, was part owner of a mortgage corporation and I have over 13 years of experience in this industry.  I have assisted over 2,000 individuals in financing their home, so I have a bit of expertise in this field.

A 30 year fixed rate mortgage interest rate today is running right about 5.25%.  If you mortgage $100,000.00, at this rate, your payment, principal and interest, would be $552.20 per month.  Not bad.  If you remained in the home for 5 years and then sold, you would have paid out $33,132.22 during that time.  Nice, safe mortgage.

A 1 year adjustable rate mortgage interest rate today is running right about 3.125%.  The 1 year ARM has what they call 2/6 caps.  This means the rate cannot increase more than 2% per year and no more than 6% over the life of the loan.  Thus the highest rate the 1 year ARM could increase to is 9.125%.  If you mortgage $100,000.00, at the rate of 3.125%, your payment, principal and interest, would be $428.38 per month.  Not bad.  In the first 12 months the total of those payments would be $5,140.51.  Let’s assume worst case scenario and the interest on this ARM goes up for months 13 - 24.  That means for the next 12 months the interest rate would be 5.125% and the payment would be $544.49 per month.  12 months of payments at that rate comes to $6,533.84.  Once again, let’s assume that the rate increase 2%, the max, for months 25 - 26.  That means the rate would go from 5.125% to 7.125%.  The payment also would increase to $673.72 per month.  12 months of payments at that rate comes to $8,084.62.  Once again let’s assume that the rate increases 2% for months 37 - 48.  That means the rate is now 9.125%.  The monthly payment also increrases to $813.63.  12 months of payments at this rate comes to $9,763.60.  Let’s assume that the rate does not change for months 49 - 60, that it remains at its maximum level for the fifth year, but remember, it could come down.  In the 5th year then, the payment would remain at the 4th year rate of 9.125% and the payment would also remain at 813.63 per month.  12 months of payments would then equal, once again, $9,763.60. 

Now let’s total that up.  Over 5 years, considering the worst case scenario for the ARM of 2% increases each year to the max of 9.125%, the total paid out would come to $39,286.17.  So the difference in out of pocket monies between a 5.25% 30 year fixed rate mortgage and a 3.125% initial interest rate 1 year ARM is $6,152.95 over a five year period.  But remember, just because an ARM rate can increase doesn’t mean it will increase.

So, there is a risk to taking a adjustable rate mortgage but it is nothing to be “scared” about and they are not “reckless behavior.” Just because an adjustable rate mortgage has the ability to increase, rate wise, does not mean it will.  Adjustable rate mortgages can also decrease.

Atrios and Fleckenstein should maybe do the math before running recklessly scared down the street hollering about the end of the world.

Posted by John Venlet on 03/07 at 02:29 PM
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Now Hear This

"The Passion” shows Jesus suffering and facing death with fortitude. Any decent human being would feel pity for an innocent man who is tortured and killed. And each of us will face suffering in our lives. But suffering is the exception and the world is not a vale of tears. We should plan and expect to achieve our values and goals. We should know that we have the power to understand the world around us and to use our knowledge, strength and fortitude to create the things that allow us to live and flourish: houses and skyscrapers; airplanes and rockets; medicine; works of art and the like. The essential fact about human life - the fact on which a morality of life should be based - is not the inevitability of suffering but the possibility of achievement.

Gibson’s film shows the depths of depravity to which humans can sink, and prompts deep reflection. But only a moral code of personal responsibility, not original sin; self-interest, not self-sacrifice; and achievement, not suffering; can avoid the dangers of moral relativism and intolerance, and ensure both personal happiness and a free society."

Bold added for reasons that should be self explanatory.

From Edward Hudgins’ review of The Passion.

Via Shawn Klein at the Ayn Rand Meta-Blog.

Posted by John Venlet on 03/07 at 01:25 PM
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How Convenient for the Cops

“Rock Musician Crosby Arrested in New York."

"Authorities say the 62-year-old musician had forgotten his bag at the hotel after checking out, and a maid found the illegal items while searching the luggage for identification. Police were waiting for Crosby when he returned to pick up the bag."

Yeah right, I’ll bet the maid was searching the luggage for identification.

Posted by John Venlet on 03/07 at 12:59 PM
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Time for a Shot of Ouzo?

“Greek Conservatives Sweep Socialists from Power" It’s a start.

Via Google News.

Posted by John Venlet on 03/07 at 12:55 PM
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Caffeine Abuse

Yes folks, it’s been spotted, in the cornfields of Nebraska.

"The wake-me-up stimulant is a fact of life for most people, but caffeine abuse is something Gov. Johanns wants Nebraskans to think about."

Of course not all Nebraskans are overly concerned, as the following comment from Mike Jones, a bloodmobile driver, demonstrates.

"Coffee? I drink a lot of it,” Jones said. “I’ll drink a couple cups in the morning, and then I have my mugs. It’s never bothered my sleep or anything. I don’t think it really matters."

But, hey, what does Mike know?  He’s just a voter.  Let’s look at what Head Nanny of the state of Nebraska, Governor Mike Johanns has to say.

"Gov. Mike Johanns disagrees. In an effort to promote “awareness, detection and prevention of caffeine addiction in Nebraska,” Johanns issued a proclamation declaring March as Caffeine Awareness Month. According to a written statement sent by the Fraser Group, caffeine overdoses can lead to headaches, jitteriness, irritability, difficulties in concentration, mood swings and other maladies."

How much is this going to cost the taxpayers? 

And soon you could be hearing, “Psst, hey buddy, want to buy an espresso?  Meet me in the crop circle third field from the crick.”

The article which I linked via The Agitator.

Posted by John Venlet on 03/07 at 12:31 PM
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All Out of Proportion

Being as my ISP was OOC this morning, the lovely Melis and I went to the theater.  We viewed The Passion. Interesting film.  I’d watch it again.  Mel did take some poetic license within the film, but what film maker does not?  For all the sadistic drum beaters out there, I counted, as I best I could, the beatings administered to the central figure in the film.  I counted 32 bastinado strikes, vigorously applied by Roman soldiers.  I counted 48, plus or minus, whip scourgings, even more vigorously applied, flaying the skin front and back, also applied by Roman soldiers.  I did not count the number of strikes adminstered on the walk to Golgotha, but I did notice that the types of whips utiliized were of a different style than the ones utilized to scourge.  More of a crowd control whip I’d say.  Meant to raise a welt, but not necessarily flay the skin.  In other words, it appeared to this viewer, quite realistic.  I then considered all I have read of punishment inflictions throughout history; The Medieval ages, the Roman empire, the British empire, the Catholic led Inquisition, the Nazi’s, the glorious states of socialism, Aztec human sacrifices, etcetera; and I was led to conclude that those who reviewed this film, and were only able to see sadism, facism, or anti-semitism didn’t go to the theater to view this film.  They went to the theater to ingratiate themselves to their adoring readers by writing scathing reviews, but they only ended up abasing themselves.

Posted by John Venlet on 03/07 at 11:13 AM
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