Example

“WHAT POSSIBLY COULD GO WRONG?”

With Mortgage and Home Loan repayments being one of the biggest expenses for most of us, it is important to check your bank statements for errors. An extra fee here, a wrong interest rate there, and bank errors could end up costing you thousands in additional interest over the life of your loan.

A STANDARD, fixed-rate mortgage agreement has two or three pages of text, with a straight forward message: The borrowers pay this amount every month at that interest rate for so many years, and if they stop paying the bank gets their house.

An adjustable-rate mortgage agreement typically runs to 15 tightly printed pages, and they are anything but uncomplicated. The borrowers start at one interest rate, shift to another in a year, and from then on the rate and the monthly payments may go up, down or stay the same, depending. Not many borrowers plowed through this labyrinth of legalese as they signed and initialed their way to an adjustable-rate mortgage, known as an ARM. That is because a Federal agency has found that many banks and mortgage servicers are flunking the rate-adjustment test themselves, with the result that many -- perhaps two out of every four -- borrowers are being billed too much or too little every month.

Example of Interest Rate Increase:

Loan amount $200,000; Quoted 6%; 7% at Closing

$200,000 @ 7% = $1,330.60

$200,000 @ 6% = $1,199.10

Difference of $ 131.50 per month

x 12 months

Increase of $ 1,578.00 per year

Times 30 years x 30

$ 47,340.00 The actual cost over the term of the loan.

Example of Yield Spread Premium (YSP) Interest Rate Increase:

Loan amount $200,000; 3 POINTS YIELD SPREAD

In non conforming loans each point of Yield Spread Premium will increase your interest rate by .60%. 3 points; .60% x 3 = 1.80% increase of the interest rate. If your interest rate was 6%, 3 points of Yield Spread would make the new rate 7.80%.

$200,000 @ 7.80% = $1,439.74

$200,000 @ 6% = $1,199.10

Difference of $ 240.64 per month

x 12 months

Increase of $ 2,887.68 per year

Times 30 years x 30

$ 86,630.40 Actual Cost over the Term of the Loan.

Example of Adjustable Rate Loan (ARL) Interest Rate Increases:

Loan amount $200,000; interest rate adjustments from 8.750% to 14.750%. In a 2 year Adjustable Rate Loan your payments are fixed for the first 24 months. At the end of 24 months your first rate adjustment can be 3% increase; 8.750% to 11.750%. Every 6 months after that your interest rate can adjust up by 1% every 6 months until you are at the fully adjusted (indexed) interest rate of 14.750%.

$ 10,813.44 Actual Extra Cost to you over the first 42 months of the Loan.

$291,144.90 Actual Extra Cost to you over the balance of 318 months of the Loan.

$301,958.34 Actual Extra Cost to you over the Term of the Loan.

We take great pride in our proven track record. To date there has not been a single customer reported complaint with the interest calculations performed by our MortgageAuditProgram. More importantly, we plan to keep it that way.