What is a Variable Interest Rate?

Sneakers41-The thing to keep in mind with annuities is that they are really a retirement product, so if you try to take your money back after the term is up, then you will be charged ordinary income tax, if you are under retirement age.

This is why when you enroll in an annuity you are leaving the funds in place long term. If you need money within a few years, this is not the right investment because you will have to pay surrender charges along with early withdrawal penalties.

A bank representative can call the insurance company and prepare a hypothetical for you to give you an idea of the type of money you will earn.

I always hear Suze Orman saying to stay away from variable annuities because once you start to invest in them, it is difficult to get out of them and they offer such paltry variable interest rates that you are better off investing that money in the market yourself and watch it grow instead of making money for the insurance company.

Oasis11-FHA loans also have more liberal lending standards since the loans as backed by the federal government.

The only thing is that their interest rates are slightly higher, but they do offer loans with as little as 3% down payment.

I know that there are some people that like to invest in life insurance annuity. A life insurance annuity can either be a fixed or variable annuity interest rate that offers guaranteed payments for a specific timeframe.

For example, if you were to invest $75,000 in an annuity that was set for 7 years, you would have a fixed rate for the first two or three years and a variable rate thereafter. You would also be offered a guaranteed minimum interest rate for the remaining years.

The minimum interest rate might be something like 1.5% which is not much, but people generally invest in annuities because they offer a higher rate of return than cash products like CD’s and money market accounts.

SurfNturf- However, when the payments reset they can be 40% to even 50% of the current mortgage payments which is why this type of mortgage is only recommended for seasoned investors that are able to sell the property within that time frame, or have the necessary funds and time to rent out the property and wait for the market to turn.

Many people bought homes in this fashion and now are unable to make their mortgage payments which have led to the foreclosure crisis.

It is believed that one out of four homes is in foreclosure, which is a total of 25% of the market.

Once you go into to foreclosure it will take at least four years for a bank to allow you to obtain a mortgage.

For FHA loans the time frame for obtaining a loan after foreclosure is more like two years.

A standard variable interest rate is offered on home equity lines of credit and ARM loans or adjustable rate mortgages.

The adjustable rate mortgages work as a hybrid mortgage in which a portion of this interest rate loan is a variable rate interest and a portion of loan is at a fixed rate.

For example a 3 year ARM indicates a mortgage that has a fixed rate with three years, with an adjustable variable interest rate once or twice a year thereafter.

Many investors and new homeowners got these adjustable rate mortgages that reset so high that there aren't able to make the payments.

Traditionally adjustable rate mortgages like these offered below average interest rates for the first few years making mortgage payments affordable for people that normally would not qualify for such a high priced homes.