| Getting a new mortgage? Watch Out!
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| | have is the equity in their home. Because
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| Mortgage brokers (even at banks) get paid
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| | homes have appreciated, many have
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| on commission. As interest rates rise,
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| | significant equity. This scheme allows
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| they must become more creative to make a
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| | agents/advisors to tap that money when
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| living. Many are honest, but there's
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| | they otherwise couldn't.
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| plenty that won't blink an eye at taking
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| | In this specific case, the agent could be
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| advantage of uninformed consumers. Don't
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| | making $85,000 off of this transaction!
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| be one of them!
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| | No wonder it sounded like such a good
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| In my previous two articles, I've shared
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| | idea! To be frank, this borders on a scam
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| how and when Interest-Only, Option-ARM
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| | and is not consistent with any good
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| and Reverse Mortgages should and
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| | financial planning principles. This
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| shouldn't be used. I've warned readers to
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| | 'advisor' should lose his/her license.
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| be very careful when refinancing or
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| | 'Av' wrote about a horror story involving
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| purchasing a mortgage because the person
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| | her parents' purchase of an Option-ARM
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| you are dealing with may not have your
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| | mortgage from an unscrupulous mortgage
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| best interest at heart. Here are some
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| | broker. To be safe, her parents included
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| true stories that clearly illustrate
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| | other family members in the talks with
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| that.
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| | the mortgage broker. He laid out all the
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| David shares, "A licensed securities
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| | details, including the most intriguing
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| dealer has proposed that I take $300,000
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| | part: an interest rate of only 1.65%. He
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| in equity out of my house before home
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| | assured them the payments would only be
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| values plummet and invest the entire
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| | $300 per month. They couldn't believe it
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| amount in an "investment grade" life
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| | and asked him several times to verify
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| insurance policy, specifically an
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| | that information. Based on his assurances
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| Equity-Indexed Universal Life (EIUL)
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| | they took the mortgage.
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| policy."
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| | Then the first payment coupon came. She
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| He described in detail how this would
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| | says, "Imagine my shock when (the real
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| allow any future growth, loans and
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| | interest rate) was 5.6%. I called...and
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| death-benefits to be tax-free. He also
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| | got the run around. I was told the
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| listed some of the negatives, such as the
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| | payment hadn't gone up." The true amount
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| high cost of the insurance policy and
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| | due just to cover the interest was
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| other expenses. The advisor had shown him
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| | considerably more then the $300 they
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| that he could pay off his house after 10
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| | expected. By paying just the $300 their
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| years with the investment, with money
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| | amount borrowed would continue to
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| left over.
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| | increase.
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| He closed by saying, "It sounds almost
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| | Before the sale, the mortgage broker had
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| too good to be true. Is this program too
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| | been so trustworthy and always quickly
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| risky, or too expensive, to warrant
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| | returned their calls. Now he gave them
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| investing my home equity?"
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| | the cold shoulder. When they finally
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| Of course it's too good to be true! It
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| | reached him, he said "You've signed the
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| doesn't make sense to tap your home's
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| | papers and that's that."
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| equity for any investment. His home had
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| | Clearly frustrated, she says, "So I am
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| probably been the best investment he had
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| | paying about 6% interest on a loan that 4
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| ever had. He was earning a guaranteed 6%
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| | adults heard was only going to be
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| or so (the interest rate on your
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| | 1.65%...we were played the fool big time
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| mortgage) while increasing his equity at
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| | and I want to warn other people."
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| the same time. Don't put that at risk.
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| | Don't accept any mortgage broker or other
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| This is just one of the new schemes
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| | financial advisors' word on something. It
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| developed by agents to keep the
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| | must be in writing. If you don't
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| commission dollars flowing. People like
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| | understand the contract, take it to a
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| David, who are not retired, don't have a
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| | lawyer or a Certified Financial Planner
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| lot of investable assets for 'advisors'
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| | who doesn't have an interest in the
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| to go after. The bulk of most people's
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| | transaction for an objective point of
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| investable assets are in a 401(k) or
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| | view. Be careful so you don't become the
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| other company retirement program.
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| | next horror story.
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| The 'pot of gold' that pre-retirees do
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