Hi All,

I have a friend that referred me to a guy that is offering an interesting service that I'm considering.

I have a $303,500 loan on my condo. I am currently on year 3 of a 5 year arm. My interest rate for the 5 years is 4 3/8%. When the 5 year arm ends, the rate will start to climb.

This guy is offering me a service whereby:

1) He'll get me into a 30 year fixed loan, let's say at 7.25 percent.
2) He gets a big kickback from the bank (using his Yield Spread Premium) - http://en.wikipedia.org/wiki/Yield_spread_premium
3) At the beginning of a 4 month period, he gives me a check which is the difference between 7.25 percent and 3.5 percent. Approximately $2840 using my numbers.
4) I pay the 7.25 percent for 4 months, but it's really the equivalent of 3.5 percent since he gave me the subsidy.
5) At the end of 4 months, we do it again with another loan.
6) At the end of the year, I add up all the interest I've paid (at 7.25 or so percent) and write off that interest in full.

So in effect, I'm really paying LESS than 3.5 percent interest.

It sounds too good to be true (yes, I know what they say). Where's the big flaw with this? The cash he gives you is not considered income - it's a YSP payback.

I think the big downside is if the interest rates start to really climb, and then he can no longer get you such a low rate...

Anyone ever hear of anything like this?

- Thanx
- Jon


Edit : Interesting vice Interesing in title
--_l0ser