Have you seen the commercials on TV for mortgage loans where you can get a $150,000 loan for only $450 a month (rather than the usual $1000)? [Watch commercial]
The ad is for Quicken Loans’ “Secure Advantage” loan. Among the other claims being made are, “Choose a low payment month after month,” and “Cut your payment by over 50%.”
Who wouldn’t want to pay $450 a month for a loan that others charge $1000 a month for? That is some bargain, right? And the offer is coming from the namesake of the popular and respected financial software product, Quicken. How can you go wrong?
*MOUSE PRINT: Â
Like the credit card companies, Quicken Loans is quoting only the minimum payment you can make on this loan each month. What is the downside of making only the minimum payment?
“When you choose to pay the minimum payment, you’re paying less than the full interest that is due for that month. By deferring your interest, the unpaid interest is added each month to your outstanding principal loan balance.
If you defer payment of interest, your outstanding loan amount could exceed the value of your home. This may affect your ability to refinance your loan or sell your home since you will owe more than what your home is worth. A higher loan amount may also result in larger payments down the road.” Â [Quicken Loans website]
In dollars and cents, the website’s example says that a $150,000 loan would only cost $438 a month because it uses an artificially low 3.5% interest rate during the first five years of the adjustable rate loan. If you only paid the minimum, by month 53 of the loan, your payment would jump to $934, then to $1078 after five years, and finally to $1389 after 10 years when you finally start to pay off some of the principal (the amount of which at this point is not stated, but higher than the original $150,000).
Negative amortization loans (where the loan principal increases rather than decreases) is a dangerous type of loan to enter into for the financially unsophisticated. It is shortsighted financial thinking to make financial decisions based only on affordable monthly payments, whether it be for a mortgage, car purchase, or credit card payment.
For more information about adjustable rate mortgages, here is a consumer handbook from the Federal Reserve Bank. [.pdf format]
Between these greedy mortgage companies and credit card companies we’re all being screwed to death! I’m going to get the price of a mule and his feed and see if it will be more cost effective than using a car and buying the costly “Black Gold” that goes up in price almost every day. We’re being screwed by everyone and there is no help for the poor consumer at all.
I remember reading how banks and mortgage companies are beginning to use this kind of loan.
It’s like an adjustable rate mortgage but allows you to defer the unpaid interest but then
adds the defered amount to the principal as indicated above. T
his kind of loan was never intended for the average consumer who wants to buy a house but for well heeled individuals or companies where defering the unpaid interest for short periods of time made financial sense. It’s more of a
financial planning tool than anything else. It’s unethical inasmuch as it lures in
individuals who don’t have a lot of money and are not financially savvy.
These companies will try whatever they can to market to an unsuspecting (and every-more sophisticated) country.
I’m just waiting for the day they say, “Get a $150,000 loan with ZERO monthly payments *”
* Payments are made every two weeks, totalling 26 per year, rather than the typical 12 monthly payments.
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I hope they don’t read this or I may have opened up a can of worms full of technicalities.
I like the old fashioned financing:
100% down and no monthly payments!
The financial software called Quicken is made and sold by Intuit, who also makes TurboTax and QuickBooks. Quicken Loans is an unrelated company which was founded in 1985 as Rock Financial, purchased by Intuit and given the current name in 1999, and then sold back to its founder in 2002. For four and a half years, Quicken Loans has had no relationship to Intuit or to the Quicken software.
Also what Quicken does when you apply for a loan is ask you for “good faith” money. Say $500 and then they process the loan telling you that when you are approved that money will be rolled into the loan. What they don’t tell you is that they will charge you for an appraisal. Then if you are not approved, they keep $150.00 of your money. Maybe there should be some “good faith” on their part!
They should be required to name these accurately in their advertisements in the language level of the average customer of these products. For example, the loan described here would be required to be identified as a “we got you” loan or maybe as a “empty wallet” loan or maybe something like “your money go bye bye” loan. That sounds like a fair trade for royally screwing peope out of their money deceptively.
First thing that made me suspicious of Quicken Loans: they advertise on national AM radio along with the snake oil peddlers and get-rich-quick schemers.
I worked for them for almost two years. (I did tech support) I saw how things were done,
the bankers were driven very hard. They had to close 10 loans a month to get paid.
If they closed 9, they only got base pay and nothing for the other 9 loans.
Like the other poster said, Quicken
Loans has nothing to do with Intuit, they allowed them to keep the name as long
as they did not do anything to damage it. Also, they will send you your loan package
for you to sign and then hound you to get it back to them overnight. I tend to like
to read over the mounds of paper that I am signing maybe even have my lawyer read it
before I agree to anything. If you deal with them, read everything very carefully.
When making a Mortgage Payment, is it called
an ” Option Loan ” that cuts the Mortgage
Payments, by 40 – 50%, or is it a ” Quicken Loan ” ?
Please explain the differences between the 2. I am
a little confused. Are there Pro and Cons using
the 2, on an Adjustable Rate Mortgage ( ARM ) ?
One other thing, what is a ” Subprime Loan ” ?
I’m always interested in reading blog stuff about financing and I don’t understand why people get mislead
by banks or creditors. You don’t need to be a rocket scientist to figure out if a loan makes sense and if
you don’t understand it- then take it to another financial professional for advise.
If you don’t have a financial professional- get one- not having a financial professional is an excuse.
or go see a friend or relative who is good with money- if you don’t have a friend or relative that is good
with money- time to invest in new friends who manage their money.
Your home is the most important (non-human) investment. When will WE stop being victims and take some
ownership and stop making excuses for getting into something we cannot afford.
Consumers please read. I agree with many of the comments, but one thing I feel that all people need to keep in mind, when you see something that is to good to be true, there is always some catch.
I am a professional mortgage banker and have been advising thousands of customers
over the years. This loan is a negative amortization loan, is should only be used
by a sophistcated investor that meets very specific parameters. When advising my
clients I advise them to become educated. Americans lack personal responsibilty when
it comes to everything. I get sick and tired of reading sob stories about consumers
that are “taken” by mortgage companies.
First, your home is the largest investment, and the largest loan 99.9% of American’s
will ever have. Yet no one wants to take the time to investgate the company they
are working with, or the type of loan they should get. No wonder foreclosures are
at all time high levels, perosonal bankruptcy are occuring at record rates!!
Our grandparents had is all correct. Payoff your home, it is not an ATM or a retirement plan
Use credit cards wisely, payoff your vehciles, you do not need to have the lastest c car
And please, please, become an educated consumer
I’m actually surprised they’re willing to admit that. But what they’re saying is essentially you can pay nothing too, and the interest will add up anyway, the only difference is you don’t lose your house for paying the rock bottom minimum.
wow, its interesting to see all the comments here. I spoke with Quicken recently and
felt they did a great job. I asked about the $450 payment for my home as well as I owe
just under 150K. I was told that the program wouldnt work for me and that its a great
option for those who had plenty of equity but needed the lowest payment possible. I
was really happy to see that they had my best interest in mind. As for the $500 I did
get a check back at closing for my 500.
I used to work as a mortgage banker for them. I saw lots of shady things and left. The reason that the Quicken Representative told you that the $450 per month program does not make sense is that they do not offer the program anymore. Quicken does not keep their loans. They sell them off to other banks suck as COuntrywide, GMAC, etc…These company’s are getting beat up because they bought all of these shady loans from Quicken. Since Quicken can’t dump them off, they don’t sell them now. They are actually stuck with some of these. I will say that the Secure Advantage is (was) a good loan for the right person, such as savvy investor or someone with a specific plan for a specific timeframe, but the problem is that Quicken sold them to many without explaining the specifics.
I applied for a home refinance loan with Quicken Loans. I have to say the customer service was excellent. I gave them a figure that my home appraised for two years ago. Since my appraisal two years ago I have had a total makeover of the kitchen and master bath. The Quicken Loans Rep asked me what I needed to get from the loan. I basically wanted to pay off debt. He then told me the appraisal would cost $400 and needed to be placed on one of my credit cards. To make a long story short, I ended up with $400 more in debt, not to mention the additional interest it would cost…due to it being on a credit card, and no loan. The appraisal came in about $15,000 less than the appraisal I had received two years ago and they were therefore, not able to offer me the loan. The Quicken Loan Rep told me I should not act like I was a victim…afterall he had spent several hours putting together the deal and didn’t get much out of it. I told him, that while I didn’t blame him, I only blame myself, because deep inside I knew there was a catch, I was simply hoping I was wrong. However, I do feel like a victim. The kind, considerate Quicken Loans Rep, was now very insensitive and brash. He told he would send me a copy of the appraisal. I’m not sure what the Quicken Loans rep got for his troubles, but I sure hope it was worth it. I wish him and Quicken Loans all the best. “If it sounds too good to be true, it is!”
On February 22, 2008 I looked into refinancing my Florida condo with Quicken Loans. They required before signing any papers a Good Faith of $750.00 by credit card over the phone. Andy with Quicken Loans insured me that the money would be refunded to me if they could not give the loan due to not appraising, etc. The only stipulation was that the appraisal fee would come out of the “good faith†money before refunded. My credit score is in the high 700’s. I was quoted for a 30 year fixed rate at 5.99% with $7k in closing costs. I was immediately approved for the loan. I held up my end with getting the needed paperwork to Quicken in a timely manor.
Andy with Quicken Loans suggested that I float the 5.99% rate overnight as things looked as though they were trending downward in hope for a better rate. The next morning Andy called to inform me that the rates were actually on the rise and now at 6.25%. He suggested that I lock in at 6.25% before they increase more, but I could now buy my rate back down to 5.99% for only $3k. Now my closing costs are now $10k from the original $7k.
To my surprise the appraisal came in lower than expected “because of the market†per Andy, but still $85k above the loan amount. I was then informed that they could no longer do the original loan, and that they would now give me the “PMI Buster Loan†for only $4k more in closing costs! Now my closing costs are $14k from the original $7k. No good faith estimate was ever given to me for the new loan being offered.
At this point, I tell Andy with Quicken Loans that I am discouraged, but he continues trying to get me to accept different loan/product options from what I was originally conditionally approved for at higher rates and more money. Because there is no urgency for me to refinance, I told Andy that I did not want to do this loan and to reimburse me the $750.00 “good faith†deposit. He said he understood and would refund me, but wanted me to think on it over the weekend before he unlocked my loan.
The next week I told Andy that I was done and wanted my money back. Andy then had Eddie with Quicken Loans call me and pressure me in closing this loan. Eddie then said, “They had spent more than $750.00 processing this loan and I would not get any of it”. Eddie was rude and told me that “Client Relations†would contact me in regards to my $750.00 and hung up.
I now get an email from Andy; two days after Eddie said he would withdrawal the loan. Andy now wants me to have another appraisal to see if it comes in higher to do the loan. What is that all about? Why could they not have their first appraiser get them what they needed, it was only off by $10k. What is it about NO does Quicken Loans not understand? High Pressure! High Pressure! High Pressure!
Quicken Loans is ripping people off with this “good faith†money scam, and then changing the original deal for higher priced undesirable products. Quicken Loans needs to be held accountable!!!
I hope my experience will stop at least one person from dealing with Quicken Loans. I had probably the, No I had the worst business experience of my life
with them. My “Banker” was Nick. He seemed very nice at first and as
time progressed, he was less helpful. I ended up with the loan from HELL. It
took about six months to close on two properties, mirror images of each other,
side by side, and only being financed for less than 50% of their value.
50% of value. I should have known early on when I received the good faith
estimate and questioned a figure, and was told that”they needed to do that to
balance the fees” (This was told to me by “John”). At the close of the loan, I find out that this “balance” was actually points that I ended up paying.
I was feeling some pressure to close the loan as I was buying property from
family, and against my better instincts proceeded with it. for months and
tons of phone calls we finally closed. I must have dealt with 15-20 people,
finally getting one whose phone actually rang directy at his desk, without the
extension number.Much more happened to close, but allow me to get to after we
close. We close the loan, and quicken fails to register one of the deeds with
county, and it is discovered by the seller, who is still registered as the
owner with the county, but I am paying the mortgage on the property. We notify
Quicken and they send us the paperwork to be signed. There is a little mix up, on my part, and the seller gets their lawyer to register the deed. I request the B*st*rds at Quicken
to reimbuse me for the filing expense, approx, $400 and they state that they
spent all the money and had none left to give me.
I held the loan for about 1 year and just refinanced with Wachovia. I could not
hold a loan with someone I could not trust. Not the best financial move
(interest rates about the same) but when Wachovia rfinanced, they found other
problems that Quicken created.
If you will allow me to give my advice, there are to many good, reputable
companies in the market, DON’T USE QUICKEN.
I cant believe that people are not more educated in the U.S. Its a shame that we dont spend time in school learning how to manage and understand the finaces of a mortgage. There are a number of ways to space out a payment with term and rate. If America was more educated we would not be in the enconomics crisis we are in. People please do not attempt to buy a home unless you have a good job for 2 years, have enough in reserve for 6 months (401k,403B,IRA checking and savings ect..), and put at lease 20% down, or maintain this much equity if you want to safely won a home.
As for quicken loans, they are a larger company that is regulated by the government just ass all larger lenders. Good luck with your mortgage experence, you can shop till you drop, but at the end of the day if your not ready for the commitment then your bound to flop.
These people at QUICKENLOANS are thieves. My swarthy Loan officer Scott W. had 2 things on his mind the day I phoned him. 1) To sell me so hard on how his service was so much different than any other broker experience, call me day or night etc… (I needed a shower after that sales pitch) 2) Give me that Credit Card, I can’t fax you any paperwork until I have that fully refundable deposit of $350.00. He was very pushy insisting on every other breath “is that a Mastercard, Visa” I would ask a question and again “That CC begins with?” I then asked “what if the loan doesn’t close, do I get my $350.00 back” He replied “why wouldn’t it close , you make what you say you make right?” Then began the not returning of phone-calls after saying “I promise I will call you before I leave the office today” This happened 3-4 times and I finally had to turn him in to a higher up there. After complaining about the service they swiftly denied my loan because an error on my credit report which I had proof to back up. It was over though. So Please I really could write 5 pages about my 10 day experience with QUICKENLOANS. DO NOT GIVE THESE PEOPLE YOUR MONEY. They are con artists and not to be trusted. They say Tuition is expensive. I’m glad it was only $350.00. Please don’t keep paying the tuition, STEER CLEAR and Run Fast… IT IS TOO GOOD TO BE TRUE….
They are advertised in the national AM radio along with vendors of snake oil and get-rich-quick schemers.They should be required to accurately name their ads on the language level of the average of the customers of these products.
People need to understand the market they are in first off. Secondly, if you cannot afford a mortgage, do not get one. Thirdly, people think that the mortgage industry is full of crooks. Some are. Most are not. The problem is the uneducated client who thinks that they deserve their mortgage for free and are entitled to dictate how and when they should get money for their home. It’s tragic. Be realistic, YOU know what homes appraise for in your neighborhood. You also sign A FULL LOAN DISCLOSURE, which dictates everything regarding your mortgage. Do your due diligence. Next, understand that if I were to come into your chosen profession, for instance, a mechanic and say “rebuild my engine” and then decided 2 weeks later after giving you a $300 deposit, that “ehhh, nevermind” you are not going to refund my money either due to the work you did. No one is entitled to anything for free. This is a America, we all work for a living. Lastly, if you don’t want to do a refinance, then don’t, stop playing the victim though and educate yourself, and stop feeling like you deserve something from the lending industry as a whole.