Interest Only Mortgage Repayment Calculator

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					An Exit Program




                                                 Create
                                                     a
                                                   Manageable
                                                 Repayment Plan

    Office of Student Financial Aid
                                      Information based on federal regulations in effect through June 30, 2006
    Steps To Manageable Repayment

•   Gather information and prepare for repayment
•   Understand repayment plans
•   Learn options for postponing repayment
•   Identify opportunities to manage your debt
School’s Average Profile
              Student Debt Profile




Note: 3.50% interest rate assumed
        Values shown are estimates and intended for use as a guideline
                                          Repayment Ability
                                                          Monthly Student Loan Payment

                              $200    $400     $600     $800     $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 $2,200
                    $30,000   8.00%   16.00%   24.00%   32.00%   40.00%   48.00%    56.00%   64.00%   72.00%    80.00%    88.00%

                    $40,000   6.00%   12.00%   18.00%   24.00%   30.00%   36.00%    42.00%   48.00%   54.00%    60.00%    66.00%
Estimated Salary




                    $50,000   4.80%   9.60%    14.40%   19.20%   24.00%   28.80%    33.60%   38.40%   43.20%    48.00%    52.80%

                   $100,000   2.40%   4.80%    7.20%    9.60%    12.00%   14.40%    16.80%   19.20%   21.60%    24.00%    26.40%

                   $125,000   1.92%   3.84%    5.76%    7.68%     9.60%    11.52%   13.44%   15.36%   17.28%    19.20%    21.12%

                   $150,000   1.60%   3.20%    4.80%    6.40%     8.00%     9.60%   11.20%   12.80%   14.40%    16.00%    17.60%

                   $175,000   1.37%   2.74%     4.11%   5.49%     6.86%     8.23%   9.60%    10.97%   12.34%    13.71%    15.09%
                   $200,000   1.20%   2.40%    3.60%    4.80%     6.00%     7.20%   8.40%    9.60%    10.80%    12.00%    13.20%
                   $225,000   1.07%   2.13%    3.20%    4.27%     5.33%     6.40%   7.47%    8.53%    9.60%     10.67%    11.73%
                   $250,000    .96%   1.92%    2.88%    3.84%     4.80%     5.76%   6.72%    7.68%    8.64%      9.60%    10.56%



                              Educational Payment
                                                                 Manageable         Challenging                Complex
                              as a Percent of Gross              (8% or less)       (between 8% and 18%)       (18% or greater)
                                 Monthly Income
Gather information and prepare
                 for repayment
     Master Promissory Note (MPN)
         and Promissory Note
Signed an MPN for
Stafford Loan funds    • States your promise to repay
                         the loan
Signed promissory      • Defines loan terms and your
note for other loans
                         rights and responsibilities
             It’s an Obligation
You must repay your student loans even if you:
• Do not complete your academic program
• Are not satisfied with your education from
  the school
• Do not find employment after leaving school
• Do not receive a payment notice from your lender
        Rights & Responsibilities
For Stafford Loans, you have a right to:
• Request a written statement of your loan
• Prepay your loan without penalty
• Request a deferment or forbearance

You also have a responsibility to:
• Participate in an entrance and exit session
• Notify your lender/servicer of changes to your name, address
  and enrollment status
• Repay the loan and notify the lender/servicer when your
  ability to repay changes
                  Review your Exit Handbook for a complete list.
  Sorting Through the Information

• Identify your lender(s) and servicer(s)
• A lender or servicer will:
    –   Send interest statements
    –   Calculate and monitor grace period
    –   Set your first payment due date
    –   Process payments
    –   Write or call if you are late
        with a payment
• Request an account statement from
  each lender
      Keep a File of Information

• Account statements
• Lender and servicer contact
  information
• Promissory notes
• Financial aid office correspondence
• Lender and servicer correspondence
Phases of Your Federal Loans




Private loan borrowers should contact their lender for details.
    They Differ from Federal Loans

Private or Institutional Loans: Ask Questions
• Is there a grace period, and what is the length?
• When does repayment begin, and how long does it last?
• Can I postpone repayment?
• What are my deferment and forbearance options and
  requirements?
• How and when is interest calculated?
• What are your interest capitalization policies?
• Is there a repayment incentive?
Understand repayment plans
Thinking Beyond Today
                                    Repayment Plans
    Monthly Payment Amount




                             Standard

                             Income-
                             Sensitive
                                         Graduated


                                            Repayment Term


              if you initially if you initially requirelower interest cost
Helpful optionHelpful optionrequire smaller payments; adjusted regularly
                          Higher monthly payment; smaller payments
        Remember Prepayment

• Make extra payments or pay entire balance at any
  time without penalty
• It’s an option for every repayment plan
• Pay less in interest expense because your principal
  balance is decreasing faster
           Interest Capitalization

• Lender adds accrued interest to the outstanding
  principal balance of the loan
• Accruing interest on interest
• Frequency of capitalization            T.H.E. has a
  varies by lender                     borrower-friendly
                                                 interest
   – Less frequent capitalization
                                           capitalization policy
     is better



     Private loan borrowers should contact their lender for details.
Repayment Strategies Calculator

  www.theloanprogram.org/tlc/Calculators/
  RepayStrategyCalc.aspx
Learn options for postponing
                   repayment
                    Deferment Basics

    • Postponement of repayment for a specific
      time period
    • Apply and meet criteria
    • Borrower responsible for interest on unsubsidized
      loans
        – Accrues or can be paid
    • Interest rate lower than in repayment (Stafford only)


Reduce total repayment: pay accrued interest during grace and deferment.
Common Deferments

    In-School Deferment

Economic Hardship Deferment

Graduate Fellowship Deferment

  Unemployment Deferment
           Forbearance Basics

• Use only if you are not eligible for deferment or
  have exhausted deferment benefits
• Temporary postponement or reduction of payment
• Apply and meet criteria
In-School Deferment

         • Enrolled at least half-
           time at an eligible
           school
         • No limit, as long as you
           continue to be enrolled
   Economic Hardship Deferment

• Qualification based on a ratio of income to monthly
  student loan payments
• Ideal for early years of medical residency
• Must apply and qualify each year
• Available for up to 3 years

              Find out if you may qualify by using our online calculator:
             www.theloanprogram.org/tlc/Calculators/HardshipCalc.aspx
      Unemployment Deferment

• Apply with documentation of employment status
• Granted in six-month intervals
• Up to 24 or 36 months of deferment
  – Depending on date received Federal Stafford Loans
              Forbearance Basics

• Use only if you are not eligible for deferment or have
  exhausted deferment benefits
• Temporary postponement or reduction of payment
• Apply and meet criteria
• Interest accrues on both subsidized
  and unsubsidized loans                           T.H.E. has a
• Interest rate equals current                  borrower-friendly
                                                     interest
  repayment rate                               capitalization policy
• Interest capitalization occurs at the end
  of each forbearance period with some lenders
                   Repayment Timeline

                             6-month
Federal Stafford Loans        Grace        Economic Hardship                    Repayment
Subsidized & Unsubsidized     Period    Apply each year, up to three years      or Forbearance




                                                                               6-mo.
                              9-month                                           Post-
Federal Perkins Loans          Grace        Economic Hardship                 Deferment   Repayment
  on or after July 1, 1993               Apply each year, up to three years    Grace      or Forbearance
                               Period
                                                                               Period



       Private &                          Contact your lender (private) or
  Institutional Loans                     school (institutional) for details
                  Loan Discharge

• Release of a borrower’s obligation to repay his or
  her federal loan, either in whole or in part
   – Death
   – Disability
• Application process differs according to discharge
  situation




        Private/Alternative Loan discharge terms vary by lender.
Identify opportunities to manage
                        your debt
           Budgeting for Success

• Prevent financial trouble
• Learn how to be a smart consumer
• Prepare a secure future by setting
  and achieving goals




Wise borrowing and smart financial habits can help lower your debt.
          Smart Financial Habits

•   Get organized
•   Determine your income
•   Identify your expenses
•   Balance your budget
                Get Organized

• Collect information
   – Bills
   – Account statements
   – Receipts
• Know your income
• Track expenses with a
  spending journal
Determine Your Income

     Total the Sources:
     • Employment
     • Personal Savings
     • Family Contribution
         Identify Your Expenses

Fixed Expenses
•   Rent/Mortgage/Association Dues
•   Car payments
•   Insurance premiums
•   Child care
•   Taxes
•   Student loan payments
      Identify Your Expenses

Variable Expenses
• Utilities                • Household
• Food                     • Transportation
• Clothing                 • Credit card
• Medical/Dental

                                Using credit cards is
                                not a good option for
                                covering expenses you
                                cannot handle.


               You have the power to control your expenses.
Is Your
Budget
Balanced?
    Expenses Exceeding Funds?

Eliminate or modify budget items that you control:
• Necessity vs. need
• Share — split the cost
• Get a roommate
• Planned buying
• Loan consolidation
• Refinance your mortgage
• Consider automobile options
Managing Credit

     • Understand what is included
       in your credit report
     • Maintain a high FICO® score
     • Pay all bills on time
     • Open new accounts over time,
       not all at once
     • Pay off debt, rather than
       moving it around to other
       credit cards
     Federal Consolidation Loan

• Simplify multiple student loans
  with one point of contact
                                       A Federal
• Reduce your monthly
                                    Consolidation
  payment amount                    Loan can make
• Lock in a fixed interest rate      things easier!
  for up to 30 years
Information based on federal regulations in effect through June 30, 2006
    Consolidation Requirements

• Must be in grace period or have entered repayment on
  loans selected for consolidation
   – Includes loans in deferment or forbearance
   – In-school loans are eligible after student requests early repay
• Eligible loans include:
   – Federal Stafford
   – Perkins
   – Others in handbook


           Private loans are not eligible for Federal Consolidation.
              Repayment Term

• Extending the term lowers monthly
  payments
• Length is limited based on your   Amount Owed             Loan Term
                                                             (Years)
  total outstanding student
                                   Less than $7,500            10
  loan debt                        $7,500 - $9,999             12
                                        $10,000 - $19,999      15
                                        $20,000 - $39,999      20
                                        $40,000 - $59,999      25
                                        $60,000 or more        30
                  Interest Rate

• Interest rate is the weighted average of
  consolidated loans’ rates
   – rounded up to the nearest 1/8%
• Grace period and deferment ideal times to apply
• Direction of rates around July 1 can
  influence timing
        Eligible Deferments

             Economic Hardship

      Pursuing a Graduate Fellowship

         Enrolled at Least Half Time

                Unemployment


Gain peace of mind and simplify your student loan debt today.
     Selecting the Right Lender



The only differences
between consolidation lenders
are service and incentives
Selecting the Right Lender

        Service
        • Knowledge and experience
        • Accessibility
        • Credibility
        • Long-term commitment
           Compare Incentives

Ask the Lender:                 T.H.E. Repayment Bonus:
• What is the incentive?        • Monthly credit
• Is there a waiting period?    • Starts immediately upon
• What happens if I miss a        repayment
  payment?                      • Will not lose benefit
• What happens if I request a   • Deferments/forbearances do
  deferment?                      not harm availability
• How many of your borrowers    • More than 95% of our
  receive it?                     borrowers in repayment
                                  receive the bonus
Compare Incentives




             From U.S. News & World Report
I consolidated some of
my loans while I was
enrolled in school this
past year.

Now what?
               Need to Know

• No grace period on existing consolidation loan
• Options
   – Deferment
   – Forbearance
   – Minimum Payment
• Be proactive, contact your lender regarding
  repayment
         Consolidation Options

Second Consolidation Loan
• Consolidate outstanding eligible loans separate
  from previous consolidation loan

Re-Consolidate
• Combining previous consolidation loan with other
  outstanding eligible loans
                  How to Decide
      Keeping them separate vs. re-consolidation

Separate:
• If you made the right choice on who holds your first
  consolidation loan, then it makes sense to create a
  second consolidation loan with that same lender
Why? —
• Maximize your savings
   – Pay down the higher rate loan faster as finances allow
                     How to Decide
            Keeping them separate vs. re-consolidation

Re-consolidation:
• If you find that another lender has a better reputation of service and
  a deliverable incentive, then bring all your loans together with that
  new lender (previous consolidated debt with recent consolidated
  debt)
Why? —
• Simplification and savings
    – Loans at one place, one point of contact and one payment
    – Minimize your monthly payment by maxing out your
      repayment term
     Second Consolidation Loan

Application Process
• Submit your Consolidation Application
   – List loans to be consolidated (e.g. recent Stafford) on page 2
   – List previous consolidated debt on page 3
   – To retain grace period, complete question #26
• Separate interest rate
• Typically one consolidation account with one payment
        Second Consolidation Loan
      Remember Your Repayment Strategy


Minimize Interest Expense
• Maximize your repayment term
• Pre-pay consolidation loan with
  higher interest rate as finances
  allow
              Re-Consolidation

Application Process
• Submit your Consolidation Application
  – List loans to be consolidated, including previous consolidated debt
    on page 2
  – To retain grace period, complete question #26
  – Manage repayment on previous Consolidation Loan during
    Stafford grace: make payments, request deferment or forbearance
• Interest rate re-calculated
• New payment schedule issued
                          Create Your Repayment Strategy
                                                          Monthly Student Loan Payment
                              $200    $400     $600     $800     $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 $2,200
                    $30,000   8.00%   16.00%   24.00%   32.00%   40.00%   48.00%   56.00%   64.00%   72.00%   80.00%   88.00%

                    $40,000   6.00%   12.00%   18.00%   24.00%   30.00%   36.00%   42.00%   48.00%   54.00%   60.00%   66.00%
Estimated Salary




                    $50,000   4.80%   9.60%    14.40%   19.20%   24.00%   28.80%   33.60%   38.40%   43.20%   48.00%   52.80%

                   $100,000   2.40%   4.80%    7.20%     9.60%   12.00%   14.40%   16.80%   19.20%   21.60%   24.00%   26.40%

                   $125,000   1.92%   3.84%    5.76%     7.68%    9.60%   11.52%   13.44%   15.36%   17.28%   19.20%   21.12%

                   $150,000   1.60%   3.20%    4.80%     6.40%    8.00%   9.60%    11.20%   12.80%   14.40%   16.00%   17.60%

                   $175,000   1.37%   2.74%     4.11%    5.49%    6.86%   8.23%    9.60%    10.97%   12.34%   13.71%   15.09%
                   $200,000   1.20%   2.40%    3.60%     4.80%    6.00%   7.20%    8.40%    9.60%    10.80%   12.00%   13.20%
                   $225,000   1.07%   2.13%    3.20%     4.27%    5.33%   6.40%    7.47%    8.53%    9.60%    10.67%   11.73%
                   $250,000    .96%   1.92%    2.88%     3.84%    4.80%   5.76%    6.72%    7.68%    8.64%    9.60%    10.56%



                                Consolidation           Extend Term         Interest Only       Deferment/Forbearance
Challenging
 Complex
Manageable
                         Consequences of
                        Delinquency/Default
                      Delinquent: late monthly payment
                          – Collection activity
                          – Damage to credit rating


     Default: failure to pay for 270 days
                                                      Remember:
         – Collection and legal activity
                                                      Update your
         – Damage to credit rating for seven years    address and phone
           or more                                    number with
                                                      lenders/servicers.
         – Wages could be garnished
                                                      Don’t ignore mail.
         – Professional license could be
           suspended or revoked
Delinquency/Default terms may differ for private and other federal loans.
An Exit Program




                                   Questions & Discussion

                                               Contact Us:
                                               888-843-0004
 Office of Student Financial Aid               www.northstar.org

				
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