The loan is based on the LIBOR index – why is the margin slightly higher than other loans, and what if rates go up even higher?
Here is where we’re changing the way mortgages are viewed. It’s no longer about the rate. It’s about how many dollars of interest you pay on a given principal balance. And because with this loan your principal balance is continually forced down by your direct deposits, this can even offset the effect of higher rates. Even, depending on your cash flow, if rates double! The power of your money sitting in your mortgage is amazing. The best way to observe this is to use the Interactive Simulator, which can be found at www.cmghome.com. You’ll see why the slightly higher margin on this loan, which is required due to its highly transactional nature, can have such a minimal effect on the overall payoff timing.
