Question

a) Is a biweekly repayment plan better than a monthly repayment plan? Why? Can you show why using examples?

b) Lenders prefer owner-occupied properties over rental properties to finance. Why?

c) What are loan points? Explain the two types.

Answer 1

a) Well, I think bi- weekly is bettter than monthly repayment because this will help to repay the principal amount faster thereby reducing the interest amount.

For example, We know there is 52 weeks in a year so a customer would make 26 loan payments in a year than 12 months in a year. So this will help to reduce the principal amount fast thereby reducing the interest.

b) Owner occupied properties are more trusted than rental obviously for one reason, If the borrorrower fail to pay the interest and principal over the period then the  lender can attach the property get back the remaining loan amount by selling.

c) Loan points are points provided by lender to pre- pay the interest thereby helping the borrower by reducing the interest rate. Usually one points = 1%. This is also called the discounted points or mortagage points.