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Quicken Loans: Cut Your Mortgage Payment by 50%*

quicken loansHave 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:  

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.”  [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]

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Microsoft Windows “Vista Capable”: Good for Booting Only

Vista largeWindows Vista is the much touted and latest operating system from Microsoft. Like most software, the publisher establishes minimum hardware requirements of your computer for the program to operate normally.

Microsoft says that a “Windows Vista Capable PC includes at least a modern processor (at least 800 MHz), 512 MB system memory, a graphics processor that is DirectX 9 capable.”  [See website.]  They do indicate that the nifty new Windows Aero interface only comes in the premium versions of the software and that advanced or additional hardware may be required.

Many computer makers have been marketing their computers as “Windows Vista Capable.”  The trouble is your idea of a “capable” computer may differ from that of manufacturers and Microsoft.

According to Dell, if you buy their minimum configuration for a “Windows Vista Capable” computer, here is what you can expect:

*MOUSE PRINT:

Dell Vista capable

Translation: The computer will turn on, but you can’t do too much with it.

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JetBlue’s Customer Bill of Rights: The Big Loophole

jet blue rightsThe past two weeks have been a publicity disaster for Jet Blue and a travel nightmare for passengers after hundreds of flights were still being cancelled days after a snowstorm passed.

To its credit, the company quickly admitted its errors and embarrassment, and pledged to do better in the future. Rather than a hollow promise to improve, the company put its money where its mouth is, and unveiled a “Customer Bill of Rights.”  It will pay people rather generously for their inconvenience when flights are delayed or cancelled — up to the price they paid for their ticket. Compensation increases as the time of the delay increases.

However, the airline will generally only provide these benefits when the cancellation or departure delay is a result of a “controllable irregularity.”  Nowhere in the policy is that term defined. So, our trusty mouse went to work, and ferretted out the definition from the company:

*MOUSE PRINT:

“A controllable irregularity is something that is within the control of JetBlue, such as staffing issues, technology issues, maintenance issues, etc. It essentially includes most everything except weather, air traffic control constraints, or airport conditions beyond the control of JetBlue.”

So, potentially the thousands of passengers stranded in airport lobbies around the country over Presidents Day weekend would not have been compensated a penny had the new policy been in effect at that time. No doubt arguments would have broken out over whether the problem was the weather or mismanagement.

Only passengers held captive on airplanes on the runway would clearly be covered because the “controllable irregularity” language does not apply to the “ground delays” section of the policy.

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