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You've probably read about them, seen them advertised on TV, or heard about them on the radio.  Interest only loans have been getting a lot of press lately, and lenders have been marketing them pretty heavily.  But what exactly is an interest only loan?  How do they work?  And perhaps most importantly, how do you decide if an interest only loan is the right loan for you?

An interest only loan is a type of loan in which all payments go toward paying off the interest of the loan instead of the principal (the amount borrowed) for a specified amount of time.  Though payments made during this interest only period are typically much lower than those of a traditional mortgage, they can also be affected by the ups and downs of the market.

In spite of their fluctuating interest rates, interest only loans appeal to many of today's home buyers and owners.  They give borrowers greater purchasing power, allowing them to make lower payments on bigger properties.  And some types of interest only loans even allow borrowers to choose from one of several payment options each month, giving additional flexibility if finances get a little tight.

The benefits of interest only loans are also balanced by some of their risks.  If you're considering buying a home or refinancing your mortgage, it's important to contact a mortgage professional to help identify your financial needs, and find a loan product that will best meet them. 

If you've turned on the radio or TV recently, you've heard about the rising costs of college tuition and room and board expenses.  Even with financial aid available for today's college-bound students, cash-strapped families are looking for options.  Some are choosing to refinance their mortgages, while others are opting to buy second homes.

Yes, you read that right.  Families are saving money by buying second homes for their college kids.  While it may seem ludicrous at first, buying a second home can actually help you save money in the long term.

• Monthly mortgage payments may be less expensive than college room and board expenses.
• Many lenders have loan programs that provide the most benefit in the first 4-5 years of ownership - just in time for your kids to graduate.
• Interest on a second home is tax deductible.
• Owning a second home gives you an opportunity to build more equity and increase your net worth.
• Extra space or rooms in the home can be rented for additional income.

More and more families are buying second homes to reduce the increasing financial burden of sending their kids to college, and so can you. 

Determining whether a home improvement will add value to your home can be tricky. There are many factors to consider. Some factors are tangible like the cost of making the improvement. While other factors are less tangible and harder to quantify, like the improved quality of life the home improvement brings you and your family.

When making a dollars and cents evaluation, first consider the costs involved in making a home improvement. Be sure to factor in the costs for materials, labor, building plans, building permits and any changes to your homeowner’s insurance.

Then consider how these improvements will impact the value of your home — positively or negatively. (Not all home improvements add value. Some can even decrease the value of your home.) Remember, your return on investment can vary as the real estate market changes. And the value of a home is not always reflected by the selling price. (In a "sellers market" your home’s value may be lower than the home’s selling price.)

Remodeling Online (http://www.remodeling.hw.net/pages/remodelingonline/index.nsp?) evaluated 15 home improvements in their annual Cost vs. Value Report. This report analyzes the percentage of cost returned for a home improvement when comparing cost to construct versus added resale value. Of the 15 improvements evaluated in the 2003 report, only a deck addition had a positive return (104.2%).

Improvements with returns in the 92.6% — 98.1% range in 2003 included: siding replacement (98.1%); bathroom addition, mid-range (95%); attic bedroom (92.8%); and bathroom remodel, upscale (92.6%). These evaluations were conducted in what is considered a seller’s market.

By Bethany McLean, Fortune editor-at-large

March 19 2007: 9:22 AM EDT

(Fortune Magazine) -- Amid the chaos of the escalating subprime mortgage crisis, the three major credit-rating agencies - Fitch, Moody's and Standard & Poor's - have been voices of calm. They've downgraded only a sliver of the debt backed by such mortgages, and they say they expect the mess to stay safely confined to the subprime sector.

But what if they're wrong? It's not just their reputations, already tarnished by their failure to give investors timely warning of the Enron or WorldCom implosions, that are at stake, but possibly the housing market itself.

To appreciate the role that the rating agencies play in today's housing market, you have to understand a piece of Wall Street alchemy: the process by which mortgages are combined, carved up, recombined and carved up again in almost endless permutations to create new forms of debt (which usually go by three-letter abbreviations).

Hedge funds hit hard by subprime woes

A bank or brokerage bundles up hundreds of mortgages and sells investors debt that is backed by mortgage payments and secured with homes. These asset-backed securities - ABS's, in Street parlance - are sold in slices, each of which carries its own theoretical level of risk, ranging from the supposedly invulnerable (AAA) all the way down to the bottom rung of investment grade and even past that, to a highly speculative unrated slice.

It's possible to create a AAA-rated asset out of somewhat shaky collateral, because the first dollar of income goes to the securities with the highest rating, while the first dollar of loss is assigned to those with the lowest. The bottom layers provide a cushion that supposedly protects the higher-rated securities.

Lately much of the bottom rung of investment-grade ABS's has been snapped up by another Street creation called a collateralized debt obligation (CDO), which, like an ABS, is sold in slices. A large chunk of a CDO that consists of barely investment-grade securities can still secure a coveted AAA rating - again, because any losses have to eat through the bottom layers.

These products exploded in popularity in recent years because investors - including pension funds and insurance companies, which must mostly buy investment-grade-rated debt - had a voracious appetite for them. That in turn encouraged a historic increase in subprime lending.

The amount of subprime mortgages issued shot up from $35 billion in 1994 to $625 billion in 2005, says Josh Rosner, a managing director at research firm Graham Fisher. Brokerage firms, which packaged, sold and traded these creative instruments, made big profits. And so did the credit-rating agencies. At Moody's (Charts) (the only one publicly traded), net income went from $159 million in 2000 to $705 million in 2006, in large part because of increases in fees from "structured finance," the umbrella under which this mortgage alchemy falls.

Today all the rating agencies say they have scrubbed the numbers, and slices of debt that are rated investment grade will mostly stay that way, even if the collateral consists of subprime mortgages.

Critics have their doubts. A paper co-authored by Rosner and Joseph Mason, a visiting scholar at the FDIC, argues that if home prices depreciate, even investment-grade CDOs will suffer "significant losses."

Wall Street banks dodge subprime bullet

Janet Tavakoli, who runs Tavakoli Structured Finance, points out that AA-rated tranches of CDOs backed by subprime mortgage paper now yield far more than AA-rated debt backed by other assets - a sign that the market doesn't trust the ratings. "No one believes the ratings have any value," she says. Opined Grant's Interest Rate Observer: "We are willing to bet that the agencies assigned too little weight to greed, ignorance, and soft criminality."

All this has real-world implications. If the rating agencies do downgrade some of this paper, investors who can't own non-investment-grade debt would be forced to sell in droves. The losses could affect the bottom line of an untold number of companies, including insurers and possibly even mutual funds.

And if CDOs stop purchasing mortgage paper, then a major source of liquidity will evaporate. That tightening of credit could affect the demand for homes, thereby turning the virtuous circle of recent years into a vicious one of falling home prices. That, say Rosner and Mason, creates the "potential for prolonged economic difficulties that also interfere with home ownership in the U.S." And who will take credit for that?

Home Maintenance: Spring A key to protecting the investment you’ve made in your home is by following a regular maintenance schedule. By performing preventative maintenance on an on-going basis, you’ll avoid many of the big ticket repair items that can lower the value of your home. Here are helpful checklists for monthly and fall maintenance.
Monthly
		Test your smoke alarm and carbon monoxide detector.
		Check the filters on your heating and cooling systems.  Be sure to clean and change according to the manufacturer’s schedule.
		If you have a humidifier or an electronic air filter, check these as well.
		Check faucets for drips.  Check plumbing for leaks.

Spring

Inside
		Check furnace air filters each month during the heating season.  Clean or replace as necessary.
		Inspect fireplace, wood stove and chimneys.  Have each clean and serviced as needed.
		When heating season is complete, shut down and clean furnace humidifier.  Close the furnace humidifier damper on units with central air conditioning.
		Check air conditioning system and clean or replace air filters.  Have system serviced as need (recommend every 2 to 3 years).
		Check and clean dehumidifier as necessary.
		Where possible, turn off furnace and fireplace pilot lights.
Basement
		Ensure sump pump is operating properly.  Check to be sure discharge pipe is connected and allows water to drain away from the foundation.
Outside
		If applicable, have well water tested for quality.
		Examine foundation walls for cracks, leaks or signs of moisture.  Repair as required.
		Check paint on outside walls and fence.  Repair and paint as necessary.
		Check level of any exterior steps or decks which may have moved due to frost or settling.  Re-level as necessary.
		Check and clean out gutters and downspouts. Repair loose joints and ensure secure attachment to your home.  Clear any obstructions and make sure water flows away from your foundation.
		Remove any debris from drainage ditches and culverts.
		Prune and fertilize landscaping as necessary.