A Dream Home Financed by Merrill Lynch Home Loans™
Cheryl and Jeff Purchased their Dream Home, Maximized their Cash Flow and Kept their Investment Strategy on Track with the Help of Home Financing Solutions from Merrill Lynch Home LoansTM.
Cheryl and Jeff were able to buy their dream home and maximize their liquidity by choosing a PrimeFirst® adjustable-rate mortgage1 with interest-only2 payments. To keep their investment strategy on track, they also opted for 100% home financing from Merrill Lynch Home LoansTM—all with one application and one closing.
While Cheryl was pursuing her lifelong goal of starting a jewelry business, Jeff, a doctor, needed to ensure that they had enough cash flow, since his monthly income fluctuated. In addition, they wanted to avoid cashing in securities and disrupting their investment strategy to make the down payment on their new home. After reviewing their full financial picture, their Merrill Lynch Financial Advisor recommended a PrimeFirst® adjustable-rate mortgage1 (ARM) with interest-only2 payments to maximize their cash flow, using Mortgage 100® in lieu of a traditional down payment.
The couple increased their liquidity by choosing the interest-only2 PrimeFirst® ARM1 with rates based on LIBOR (London Interbank Offered Rate), which are historically lower than rates based on other indices. When Jeff receives payment from a client or insurance company and the couple’s monthly cash flow increases, they are able to pay down the principal balance on their mortgage, which is then recalculated, further decreasing future mortgage payments (assuming interest rates do not rise). They can also use any savings incurred to pay off high-rate debt, make purchases or invest in Cheryl’s business or in the market.
In order to eliminate the need for a down payment, Cheryl and Jeff opted to use Mortgage 100®, a Merrill Lynch Home LoansTM securities-based 100% financing solution. They were charged no additional fees and pay no Private Mortgage Insurance (PMI) to use Mortgage 100®. In addition, they enjoyed potential tax benefits by avoiding the potential capital gains they would have incurred by cashing in securities for a down payment.3 Best of all, because their money remains invested in a Merrill Lynch pledge account, they continue to earn dividends, interest and capital appreciation, potentially enhancing their net worth. Cheryl and Jeff can also continue to buy, sell and trade in their pledge account, with certain restrictions, keeping their investment strategy on track.
Not only did the couple buy their dream home and start a business, they experienced no real impact to their standard of living because of flexible and customized home financing solutions from Merrill Lynch Home LoansTM and the guidance from their Merrill Lynch Financial Advisor.
The case study presented is hypothetical and does not reflect a specific strategy we may have developed for an actual client. It is for illustrative purposes only and intended to demonstrate the capabilities of Merrill Lynch and/or Bank of America. It is not intended to serve as investment advice since the availability and effectiveness of any strategy is dependent upon your individual facts and circumstances. Results will vary, and no suggestion is made about how any specific solution or strategy performed in reality.
Past performance is not an indication of future performance.
Important Information about Mortgage 100®: Merrill Lynch’s Mortgage 100® program requires the pledge of eligible securities owned by an individual and maintained in a Merrill Lynch, Pierce, Fenner & Smith, Incorporated brokerage account. Member, Securities Investor Protection Corporation (SIPC). Mortgage 100® may not be suitable for everyone and a default on your mortgage could result in both the loss of your home and your securities. Should the value of the securities pledged as collateral decrease below a certain level (as specified within the loan documents), the deposit of additional assets and/or liquidation of assets may be required. Merrill Lynch may liquidate some or all of the securities in the account without contacting you. You are not entitled to an extension of time to meet a collateral call or choose which securities in your account are sold to meet the collateral call. Liquidation may result in adverse tax consequences. Mortgage interest may not be deductible if tax-exempt obligations are pledged as additional collateral. Trading within the brokerage account for the 100% financing programs is subject to restrictions.
1When deciding whether an adjustable-rate mortgage is right for your situation, you should consider the potential risk of rising rates and payments and such factors as how long you plan to own your home.
2This is an “interest-only” mortgage that allows you to pay only the interest on the money you borrow for a certain number of years. If you only pay the amount of interest that’s due, once the interest-only period ends, you will still owe the original amount you borrowed and your monthly payment will increase – even if interest rates stay the same – because you must pay back the principal as well as interest. You should ask what the payments on your loan will be after the end of the interest only period. If you are considering an adjustable rate mortgage, ask about what your payments can be if interest rates increase.
The relative benefits of a loan for debt consolidation depend on your individual circumstances and your actual debt payments. You will realize interest payment savings when you make monthly payments towards the new, lower interest rate loan in an amount equal to or greater than what you previously paid towards the higher rate debt(s) being consolidated.
3Any information presented about tax considerations affecting client financial transactions or arrangements is not intended as tax advice and should not be relied upon for the purpose of avoiding any tax penalties. Merrill Lynch nor its Financial Advisors provide tax, accounting or legal advice. Clients should review any planned financial transactions or arrangements that may have tax, accounting or legal implications with their personal professional advisors.