FINANCIAL HOUSEKEEPING | Step up to a “CD ladder”
With interest rates having been on the rise, savers and income investors are faced with some interesting choices when it comes to certificates of deposit. While studies show that investors aren’t getting a big premium to lock their money in place for four or five years, many people will find that the long-term CD yields are attractive enough that they might want to lock them in place in case there’s a rate reversal ahead.
With that in mind, the CD laddering calculator at helps savers divide their money between different certificates of deposit to improve long-term returns. The calculator provides a specific game plan for splitting the money into different time intervals.
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SHORT COURSE | Two-step mortgage
As consumers have become increasingly wary of balloon mortgages, lenders have come up with new and different ways of marketing the loans. Some lenders call it a “two-step” mortgage and others use marketing terms such as “Super Seven” mortgage, but the basic function is the same:
In a two-step mortgage, the borrower gets a below-market interest rate for a specified number of years – typically seven or 10 years – and then gets a new rate based on market conditions (and with certain limits) that applies to the remainder of the loan.
Typically, the lender has an option to call the loan at the end of the below-market period, which requires the borrower to make an enormous payoff or refinance the loan; in this fashion, the two-step deal is just another twist on a balloon loan.
