3.75 vs 4.00

[HLS]

Bewildering,
You get it. Congratulations.

Just understand that if you only make your regular payment on your current 3.625% loan, you are adding approx 15 payments to the payoff date of your original purchase loan.

By adjusting your monthly payment slightly, you can stay on track and pay your existing loan off 15 months sooner, still a huge savings over your original payment amount.

Going from 4.625% to 3.625% and eliminating PMI is a nice huge bonus.
Your PMI probably dropped because you were between 80.00% and 85% rather than the 90%. The premium is lower below 85%

[NotCranky]

It’s not idiotic semantics. You have to look at the same rate environment not the current one against a previous one. It’s not free compared to the current rate environment or else HLS doesn’t get paid and he gives the best rate possible for the specific client. Thats what matters when you are shopping the loan and possibly having to or wanting to live with it for a long time, like 5 years or more. How often does HLS not get paid anything for loans he originates? Not too often. Hence, no cost equals free loans doesn’t add up.

[bearishgurl]

[quote=Blogstar]It’s not idiotic semantics. You have to look at the same rate environment not the current one against a previous one. It’s not free compared to the current rate environment or else HLS doesn’t get paid and he gives the best rate possible for the specific client. Thats what matters when you are shopping the loan and possibly having to or wanting to live with it for a long time, like 5 years or more. How often does HLS not get paid anything for loans he originates? Not too often. Hence, no cost equals free loans doesn’t add up.[/quote]Blogstar, do you expect someone in HLS’s profession to “work for free?” The “system” is set up to compensate mortgage loan officers/brokers/agents for their hard work in bringing a client in and finding the best program for their needs, processing all the documentation for a mortgage and even originating some first and subsequent trust deed mortgages. The vast majority of borrowers can’t do any of this on their own, and, in any case, are not licensed as a RE broker/salesperson, nor have any kind of a lending designation on their license. Even when there “direct lenders” and mortgage loan officers working for the “Big Banks” in portfolio lending (15+ years ago), these people still got paid even on mortgages which are “no cost” to the borrower. If they were actual employees, they got salary and bonuses. If they were a mortgage banker, they got paid through the loan originator.

As long as HLS and his brethren aren’t attempting to originate NINA loans, falsify loan applications and, in general, deal in exotic instruments which are difficult, if not impossible for Joe and Jane 6p Borrower to understand, I’m all for more (highly qualified and principled, of course) people in this profession.

In most cases, the “system” isn’t set up for reward Joe6p, the borrower, for taking out a new mortgage. It can, however, allow him do it for “no cost” to him.

As it should be.

[NotCranky]

No I don’t expect him to work for free but it isn’t a free loan if he doesn’t do it for free. He does it for free and there are no costs, that’s the only way you get a free loan.

[Anonymous]

Still going on about “no cost” loans?

A typical loan or refi will have at least a couple thousand dollars in fees. People are involved who need to be paid: appraisers, escrow companies, etc. These are up front costs – there’s no other word for it.

The costs can be paid up front or financed.

The costs of the loan should be laid out very clearly to the borrower. There are laws that are intended to ensure this happens.

Claiming that no cost mortgages exist by using clumsy semantic gymnastics is just plain deceitful.

We’ve been through this before, on another thread. Same response from HLS: lots of verbiage talking around the basic facts and insulting terms like “idiotic.”

There are pros/cons of financing the costs vs. not financing the costs. I would steer clear of any lender that claims that there are no costs.

[scaredyclassic]

Cost is a funny word. Kind of like free, plus shipping and handling.

If I can get the same product at a lower rate but I pay nothing upfront out of pocket, to get either one, are both loans free, or does the higher rate “cost” anything?

[HLS]

Better advice is to steer clear of the ignorant.

The point of contention is not whether a loan with costs is better than a no cost loan, it is whether no cost loans exist.

No cost loans do exist. Every loan rate has a cost or credit associated with it.
A no cost loan to the borrower occurs when the credit from the lender covers all 3rd party fees.

It is free to the borrower, i.e. NO COST.
If you start with a $400,000 loan, you end up with a $400,000 loan and nothing is added anyplace else.

If you want a lower rate you are welcome to pay costs.
I’ve never said that a no cost loan comes at the lowest rate possible.

I looked up the definition of FREE to make sure I understood what it meant, and it said COSTING NOTHING.
So I will stick with my assertion that a no cost loan IS a free loan.

To say that a no cost loan doesn’t exist IS wrong
(and it’s idiotic)

I also looked up the definition of idiotic which referred me to stupid, which is defined as “unable to think clearly”
I think my use of the word is accurate.
******************************
To understand the power of compounding and don’t think it’s worth it to refinance to only save .25%…..

Saving .25% on a $400,000 loan can save you $37,000 in interest AND it can be done at no cost**
Saving .50% on the same loan can save you $72,000

**You can also pay $$ to get your loan and you might save even more.

[Anonymous]

I love it when car dealers have sales where there is no sales tax.

How do they convince the government to not collect taxes?

[Coronita]

Man, people really like to argue of semantics on this blog. Perhpas the better way to call the “no cost loans” is “no out of pocket cost loans”.

And yes, there are benefits to getting one. If your loan rate is .25% or higher than a new “no out of pocket cost loan”, refinancing will save a you a lot over the course of the 30 year loan in interest if you are early on in the loan. In many cases, refinancing to a 30 year also includes a cash back rebate, so in that case there almost isn’t a break even point. You break even almost immediately.

The math can be confusing for most people whixh is why i suspect some will make blanket statements about it one way or the other. If you want the spreadsheets to see this, I can dig up my old Google doc sheets.

Or just ask a loan person to grind through it with you. Real numbers don’t lie. And it depends on your particular situation, particularly how far along are you with your existing loan, and if that makes a difference, how loan you pthink you are going to stay where you are.

But it’s been awhile for me. I paid off my 15year loan on my primary in December 2015 so I don’t have a loan…well not until I buy another place.

[NotCranky]

You’ve got a no cost free house FLU, congrats!

[HLS]

FLU,
I know you get it, I think.
You’re exactly right that the real numbers don’t lie AND there are different ways to benefit from a refi.

When you are going to a lower rate at no cost, there is no break even point you benefit from day one compared to your previous rate.

If you want to compare what the additional savings would be at .125% or .25% lower if you did pay to get the loan, I suppose you could create a spreadsheet and get confused but I can explain it simply in about 5 seconds.

If you want to pay for a loan and get a lower rate,
the payback period to break even is usually 5 to 7 years.
Each .125% has a different spread and not everybody qualifies at the same rate.

Sadly,
another problem is that most ‘loan people’ don’t understand the details nor can they explain the
true net benefits and options in refinancing.
Pathetic but true.

Most loan people only grasp 2 things:
a)How much they are going to make on your loan
b)How much your payment will be
They are incapable of discussing anything beyond these 2 points. They can’t grind through it with you.

There is nothing in the education & testing requirements that a licensed, regulated loan officer needs to be capable of explaining different options and the various net benefits. As a result, there’s a lot of misinformation out there.

[NotCranky]

OR they could just read this:

http://www.thetruthaboutmortgage.com/no-cost-refinance-loans/

[plm]

I don’t understand why HLS is getting beat up so much. The article mentioned that some bad lenders can do unscrupulous things such as roll the fees into the mortgage.

Not the case when I refinanced a few times with HLS. And no costs that can be explained by this:

https://www.youtube.com/watch?v=3WNlWyFgLCg

Everything was explained clearly with options on getting so much money back at a certain rate or paying more to get a better rate.

And afterwards, I did all the painful math and it really was a no cost loan.

Personally I think no cost loans are great in that it allows additional refinancing as rates go down.

[NotCranky]

Are rates likely to go down now?

[plm]

Actually, it seems like they are lower now than my current 3 percent, 15 year fixed. But I guess it may be not be low enough to have the fees covered so it doesn’t make sense to refinance.

I usually get a call to refinance when it makes sense. Last time was at 2.75 but I was too slow to take advantage before rates went back up.

No more refinancing for me though. I’m thinking of just paying off the mortgage.

[Author]

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