Clayton's Mortgage Plan - BETSI

[Meg]

Just talked to Clayton Homes which has their own bank and is a stable company. They're offering a mortgage plan known as BETSI - which stands for Build Equity Thru Saving Interest.

They figure a 19-year (284 months) payment plan that increases the monthly payment by a very small amount each year. This is NOT a traditional adjustable rate mortgage (ARM). The amortization schedule is listed in the contract so you know what the payment is going to be 18 years from now.

The example given was $90,000 financed at 6.24% with a factor of 3.5% - and NO - I don't know what the factor means.

The first year, the monthly payment would be $465. The next year, it goes up by $16.38 and is $484.38 - the next year - and every year for the life of the loan it increases by $16.38, with the highest payment being $763 a month.

At any time the buyer can lock into a monthly payment but that would extend the loan.

Hey, I just noticed something! It says "convenient monthly dratt" and I'll bet they mean you HAVE to agree to the monthly draft. If that's the case, then I don't like it - but the other two positives are - there is no early payoff penalty, no origination points and no discount points.

I really like the idea of a 19 year mortgage. When you get to be my age (48) you don't want to take on a 30-year responsibility.

Okay, Mr. Murray - can you see anything wrong with this picture?

And does any other bank/mortgage company/m-h company offer this kind of a deal?

I just noticed something else - 284 months is actually 23.5 years - not 19 years, so I'm msising something.

[Meg]

The OTHER good feature of BETSI is - there are NO closing costs.

[rmurray]

There are a few problems with this kind of loan...You mentioned 2 of them...
The third is very important for some folks...This is a negative amortization loan...The interest at 6.5% on 90K is $ 585/mo..That means they are adding back to your principle $1212 the first year..Actually they are adding money back to the loan for the first 7 years...After 84 months your payoff will be about $ 95,500...Remember most folks...no matter what their original plans..sell the home in the 5th or 6th year...things change...
If you have enough money for this loan's required down and good enough credit to qualify with Vanderbuilt Mortgage (NOT A BANK BY THE WAY..Clayton does not own a bank..they own a mortgage company), you should be able to qualify for a 5.75% (maybe even 5.5%)traditional 15 year mortgage...The principle and interest payment for 15 years would be about $ 750..That would be about $ 45,000 interest for the full term...You compare..And the payoff goes down with the first payment
After 84 months..your payoff would be $ 57,401...Pretty big difference...Remember the higher amount of the payment all goes to your payoff..It is your money and can save tens of thousands..
Go to www.mtgprofessor.com and study up on mortgages..You might even e-mail the professor and ask his oppinion..He probably would be interested in this new wrinkle on mortgages..
Good Luck