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By Robert J. Bruss
Inman News
DEAR BOB: What do you think of the new"interest-only" home mortgages? As a longtime mortgage broker, atfirst I didn't recommend them to my borrowers. But in some situations, such aswhen a home buyer only expects to stay in the home a few years, I began tothink these loans were a good deal for the borrower because in the first fewyears there isn't much mortgage principal payoff David G.
DEAR DAVID: We agree. The new "interest-only"mortgages are a very good deal for the lenders. The reason is they keep all themortgage principal busy earning interest dollars. That's the primary goal ofmortgage lenders to keep interest coming in.
Purchase Bob Bruss reports online.
Just between us friends, mortgage lenders really don't wantto receive principal pay down. The reason is they then have to rent that moneyagain to earn interest on it.
But homeowners who plan to stay in their residences"forever" should not borrow on an interest-only mortgage. The primaryreason is such borrowers won't be gradually paying down their mortgage balance.
Also, interest-only mortgages are great for investors whowant to keep their monthly payments at a minimum while making 100 percent of theirmonthly payments tax-deductible interest. More details on the tax aspects areavailable from your tax adviser.
SMART VACATION TIMESHARE BUYER TELLS ALL
DEAR BOB: I've read your columns over 10 years. Why do youdiscourage vacation timeshare investments? My husband and I own two deededproperty vacation timeshares and we have always been thrilled with our vacationexperiences. Before we purchased a timeshare, we attended severalpresentations. In fact, during our financial lean years, we took advantage ofthe presentations that offered two- or three-night destination stays. That washow we vacationed and learned. We learned to buy deeded property instead of"right of use" timeshares. Now we use one timeshare to trade forvacations in other areas, but we love to use our Orlando, Fla., timeshare, asit is one of our favorite places to vacation. Why do you discourage timesharepurchases? Julia H.
DEAR JULIA: Congratulations. Thanks for sharing your goodtimeshare experiences. Most people are not as wise as you were about buyingtimeshares.
The primary reason I suggest buying vacation timeshares onlywith money you will never need again is they are virtually impossible to resellfor their purchase price.
A secondary reason for being extra careful is the risingannual fees for most timeshares. As resorts get older, they need more repairsso the annual fees go up, often 10 percent to 20 percent per year.
A third reason for not buying a timeshare is the difficultyof getting rid of it. Most timeshare developers and property managers refuse totake timeshares back, even for free.
With a big timeshare supply still available, most developerswant to sell their "new" timeshares rather than take back resaletimeshares from unhappy buyers. As users who purchased at good locations,thanks for your favorable timeshare report.
REALTY AGENT QUITS BROKERAGE OVER "PROCESSING FEE"
DEAR BOB: Thank you for explaining the real estate brokeragerip-off fees some companies are charging their unsuspecting home sellers andbuyers. I formerly worked for a nationally franchised famous-name broker whocharges home sellers a $495 administration fee and home buyers a $195processing fee. To "sweeten" these fees to us agents, the firm gaveus $50 from each fee we collected at the home-sale closing. I found thisprocedure despicable. So I left and am now happily affiliated with a smallerfirm, which doesn't charge home sellers or buyers any fees other than thecustomary sales commission Jen H.
DEAR JEN: Congratulations on leaving your brokerage becauseof the unnecessary and pure-profit junk or garbage fees. Real estate brokersshould be able to profit from the traditional real estate sales commissionswithout charging additional fees to home sellers and buyers.
The new Robert Bruss special report, "Ten Easy ProfitMethods for Your Home and Investment Property," is now available for $4from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at1-800-736-1736 or instant Internet download at www.bobbruss.com.
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