3.75 vs 4.00

[Coronita]

Yeah, I don’t quite get what the issue is. If you want to refinance, you can either get a loan with no out of pocket payments with rate X or if you want to pay closing costs and points, you can get rate Y where Y is less than X.

There’s nothing deceptive about this.

[HLS]

Thanks PLM,
I can take it… I’m only being ‘beat up’ by a few and it’s just the semantics of what were discussing.

They don’t know me and assume that I’m some scumbag who doesn’t know what I’m talking about nor do they know how detailed my explanations are to anybody who wants to listen rather than argue.(or think they know it all)

I had a radio show in the San Diego market for over 3.5 years in a declining market, telling people to wait to buy AND counseling LOTS of people for FREE through foreclosures & short sales that I didn’t make a penny on.

I guarantee that when I say NO COST, it’s no cost.
ALL 3rd party fees get paid by the lender.
I’ll gladly defend what I do.
I’ve never jerked anybody around or misled them about what their options were.
I’ve never told anyone that I have the lowest rates possible. There are probably a million websites for mortgage pricing. If you want to shop and get thrown around, have fun.

I’ve had dealings with several hundred people from this website, most are not posters.If there were any complaints, I’ve missed them. I only get beat up by those who don’t know me.

Some people get angry or confused because a no cost loan doesn’t mean no out of pocket.

If you do not refinance, you still have a payment due every month, in arrears for interest (+ principal)
That is due whether you refinance or not.
A no cost loan does not mean no out of pocket.
If your insurance is due, its not my fault.
You need to pay it whether you refi or not.

You still need to pay the things that need to be paid, but ALL costs incurred with refinancing are covered by a credit from the lender.

I have NEVER said that a lower rate was not available with a cost.
The example given in the link above is misleading and outdated, rates haven’t been 6 to 6.50 in over 10 years.
A lot has changed in loan pricing since then.

I priced a $400,000 loan this morning for a borrower who is currently at 4.125%
3.75% NO COST PLUS $1700 credit back payment $1852
3.625% COST of $800 Payment = $1824
3.50% COST of $4300 Payment = $1796

The cost spread between 3.50% and 3.75% is $6000.
It saves $56 a month ($672 a year) in payment.
If it’s worth it to you to spend $6000 today and save
$56 a month you can.
If you sell or refinance in the next 6 years you threw away some money.

Anybody can do the math (if thye know how).
I don’t force anyone to get a no cost loan. What puzzles me is those who do nothing
when they can save at least .25% with a no cost loan and don’t think it’s worth it.

I have spoken to writers of major magazine articles who used incorrect data and I offered to clarify it for them and they refused because they didn’t want
to admit they were wrong. The FACTS don’t lie.

There is hundreds of millions of dollars being wasted in interest because the average person doesn’t understand the true/best benefits of refinancing to a lower rate.

I’m happy to analyze anyone’s situation for free.
I don’t care if someone gets a no cost loan or wants to pay $6000 so they can save $56 a month. That’s a personal decision. BUT don’t tell me that there’s no such thing as a no cost loan.

The key with ANY loan is what you are paying in interest. The borrower decides the term by adjusting their payments. Nobody forces a borrower to start over at 30 years.
You have a choice to decide if you want to pay to lower your rate OR lower your rate at no cost (which to me is a no-brainer if you can qualify)

The REAL tragedy is that many people do nothing because they read drivel and get bad advice from knuckleheads.

[no_such_reality]

[quote=flu]Yeah, I don’t quite get what the issue is. If you want to refinance, you can either get a loan with no out of pocket payments with rate X or if you want to pay closing costs and points, you can get rate Y where Y is less than X.

There’s nothing deceptive about this.[/quote]

The concept is simple, the execution historically has been fraught with deception and poor ethics.

YSP still clouds the issue for the end consumer and obscures how much is really being paid for services particularly when tagged with the above, IMO.

[NotCranky]

it’s the trolling. That’s what the thread becomes. Troll Troll Troll , maybe both side of the argument, but make no mistake HLS is trolling, then some stooge inevitably comes on here and defends him , setting him up for the , thank you PLM and massive HLS is God pitch; by HLS. Troll Rinse lather repeat. Yea ,IMO somebody who does that looks like a used car salesman.
Poor HLS is not getting beat up. He’s working it.

[Anonymous]

The “semantic” debate comes down to this: loans always have a cost. There are two components to the cost:

– The interest
– The transaction fees

The “no cost loans” that lenders are pitching simply move the cost of the transaction fees to the the interest rate. The lender will always charge a higher rate to compensate for their lost transaction costs. “No cost loans” do not eliminate costs, they simply move them around.

There are situations when that may be advantageous to make that trade. A “no cost loan” is an alternative and can be completely legitimate, despite its misleading name. However for anyone who plans to keep a property for many years, trading upfront costs for a higher rate is probably not going to see as much net benefit from a “no cost” refi as they would with a lower rate, “cost” refi.

In many situations where a “no cost” loan is good, a “cost” loan may be better.

[HLS]

[quote=no_such_reality]
The concept is simple, the execution historically has been fraught with deception and poor ethics.

YSP still clouds the issue for the end consumer and obscures how much is really being paid for services particularly when tagged with the above, IMO.[/quote]

Those days are long gone with BROKERS….
the process is highly regulated now.
If you are offered a loan with 100% clear terms, what your net cost is, whether you pay OR get no cost,
What is unclear about this ? What does YSP have to do with it ? Are you concerned about what someone is making regardless of what they are offering you ?

FYI
Banks & Direct lenders can screw you as they can manipulate their pricing.

Mortgage brokers are like Insurance brokers.
Lenders & Insurance companies control the pricing. Insurance agents don’t discount the insurance company pricing nor do they charge you extra.
They get compensated by the insurance companies.

There are 2 kinds of mortgage BROKER compensation.
Lender paid OR borrower paid.
With lender paid the wholesale lender compensates us a % of the loan amount.
With borrower paid the borrower compensates the broker and gets the exact same pricing. It’s HIGHLY regulated.

Whether you want a rate that is higher or lower doesn’t affect BROKER compensation by 1 penny.
Any credits or cost is to/from the borrower.

The days of BROKERS benefiting from overcharging borrowers are long gone, although some brokers make a higher % than others.
Banks and direct lenders can still get away with things that a BROKER cannot.
Bank employees generally do not have access to true pricing. They only see the retail rates to offer consumers and have no idea about net pricing.
There is a difference between regulations for Banks/ Direct Lenders vs. Brokers

[HLS]

Bloggy,
In almost 9 years on this site, 99.9% of my posts are intended to helpful & be educational.
That’s a far cry from trolling or asking for business.

If I get attacked by an argumentative stooge like you,
you bet I’m going to defend myself with facts, not ignorance or pretending that I know what I’m talking about.

There’s no doubt in my mind that I’ve helped FAR more people on this site than you ever will have with your advice.
I’ve talked more people through understanding their loans that didn’t come from me than you would ever imagine.

Frightening to think that people might get their mortgage advice from you.

[Coronita]

[quote=harvey]The “semantic” debate comes down to this: loans always have a cost. There are two components to the cost:

– The interest
– The transaction fees

The “no cost loans” that lenders are pitching simply move the cost of the transaction fees to the the interest rate. The lender will always charge a higher rate to compensate for their lost transaction costs. “No cost loans” do not eliminate costs, they simply move them around.

There are situations when that may be advantageous to make that trade. A “no cost loan” is an alternative and can be completely legitimate, despite its misleading name. However for anyone who plans to keep a property for many years, trading upfront costs for a higher rate is probably not going to see as much net benefit from a “no cost” refi as they would with a lower rate, “cost” refi.

In many situations where a “no cost” loan is good, a “cost” loan may be better.[/quote]

Not really. As you have guessed I use to be a serial refinanced roughly every 2-3 years when rates fell more that 0.25%.
It really depends on the interest environment and your situation. When your at the start of 30 year loan almost all of your payments goes into interest so if rates on the new loan were significantly less, refinancing with a no cost loan you still came out ahead with no period to recover the loan. And in some cases, those low cost loans ended up rebating you several thousands of dollars. If you paid points or closing costs to lower your rate, chances are you got screwed because rates for those no cost loans ended up falling below that rate you paid points and closing costs on.

So, like I said it really depends ones personal situation whether a no cost loan or a loan with points/closing costs make sense.

In an environment when rates are rising or high, it might make sense to buy down your loan rates. In an environment when rates are low and flat or falling it probably makes more sense to have a no cost loan, since if rates fall even lower you can refi again and buying down a low rate loan probably makes less sense…and if rates don’t fall again, you still got a better loan than before.

Also, if you plan on selling your house way before the loan term is up or end up paying it off early, paying points/closing costs is just wasting money.

Also, in some scenarios, no cost loans simply does not exist. My only loan left is a 30year for one condo. I had to pay closing costs because the loan balance and nature or the loan did not allow for a no cost option, and I shopped around. Then again, that loan I won’t be refinancing because there is a no cost option and since its still way lower than the 8% ROI I get from the rent income. Which is one of the reasons why u haven’t paid it off. It cash flows even with 30year.

Plus to pay off that mortgage, I would need to sell stock. That means I would have to take a capital gains tax hit on my stock. And then I pay off my rental… Which means my net rental income is more…which means I would need to pay even more taxes on my net income from the rental…and the two combined would push me into an even higher tax bracket along with my W2 paycheck that already puts me into bad tax bracket….Uh no thank you. I’ll take anything that drives my rental investment costs up now to lower my rental income now and wait until my W2 is $0 before I want to realize more investment income elsewhere.

Its like 401k, deferring income until later when your paycheck income is less. Only its better than a 401k because there are a lot more variables to play with. The more variables and complicated it is, the better it is for you.

[Anonymous]

Lol, the kitchen sink analysis.

[Coronita]

[quote=harvey]Lol, the kitchen sink analysis.[/quote]

I like to consider my options, plus I want to see if I can beat BG to see who can come up with the longest post on this thread. It’s my new goal on Piggington. Did I succeed? Its kind of hard for me to type though on a tiny smartphone where I am.

[no_such_reality]

You can fix that W2 issue.

Every year you wage slave, is a year with your children you don’t get back.

[Coronita]

[quote=no_such_reality]You can fix that W2 issue.

Every year you wage slave, is a year with your children you don’t get back.[/quote]

My wage slave is pretty relaxed at my new master.

[bearishgurl]

[quote=no_such_reality][quote=flu]Yeah, I don’t quite get what the issue is. If you want to refinance, you can either get a loan with no out of pocket payments with rate X or if you want to pay closing costs and points, you can get rate Y where Y is less than X.

There’s nothing deceptive about this.[/quote]

The concept is simple, the execution historically has been fraught with deception and poor ethics.

YSP still clouds the issue for the end consumer and obscures how much is really being paid for services particularly when tagged with the above, IMO.[/quote]NSR, escrows aren’t “rocket science.” In the absence of being in the middle of refi for purchasing RE, one is certainly free to call around and/or visit websites of local escrow companies, title companies who do business in your county and whichever lenders who have products you are interested in looking into. They and/or their site will TELL you how much their ALTA and CLTA rates are per $10K or $100K of your loan or purchase price, what is customarily paid in CA by the buyer and the seller or split between the two, typical escrow fees for your loan amount or purchase price, loan or buy-down fees, doc drawing fees, typical appraisal fees (whether in-house or contracted), even tax service fees and typical notary fees for your transaction! Upon shopping for mortgages, you should easily be able to see which lenders have a lot of “garbage charges” and who doesn’t and the reasons why in each case.

In CA, all your ancillary fees are the SAME to you as the seller or buyer/borrower whether or not you even take out a purchase money mortgage or WHO contracts for them (seller’s choice, buyer’s choice, escrow company’s choice (which may be a subsidiary of a title company), or the lender who is paying for all of it (providing it to their borrower-client “free”).

If your lender provides all your ancillary services for “free,” they are certainly going to exercise their right to contract with services of their choice and yes, they may have a financial stake in some of the service providers they opt to use. But ALL of these tasks still must get done, whoever does them, and, in this case, the borrower isn’t paying for it. For example, there isn’t that much difference in title insurance fees from one title company to another. One or two in each county have their own plants but every one of them has to get their info from the same horse’s mouth …. that is, your county recorder and assessor’s office.

The inner workings of YSP between lenders and boots-on-the-ground mortgage brokers, originators and bankers are not well understood or generally known to the public and it doesn’t matter (except when they were an exorbitant 5-12% during the exotic mortgage, fog-a-mirror, get-a loan era). During those years, NINA mortgages were commonly (fraudulently) made to people with a known (to the mortgage broker) falsified mortgage application and supporting docs (often prepared for the lender’s underwriter by the broker’s own processor). This was all engineered to line the pockets of shady, greedy mortgage brokers when their clients agreed to the terms of exploding mortgages due to having bad credit or no credit and often needing “rescuing” from imminent foreclosure. Many of these mortgage brokers have since had their licenses suspended or revoked … for good reason.

YSP is the same principle as buying a new vehicle from a dealer who is selling it to you for well under True Car and Edmund’s price points for your area because the vehicle mfr will compensate them after the sale thru the back end (thru a bonus or “kickback”). As a new vehicle buyer, you don’t CARE about this nor do you have any control over it! You only care about the terms of your OWN deal. These “bonuses” aren’t well known or understood by the new vehicle-buying public but it doesn’t matter, because, just as with mortgage brokers, mortgage bankers and lenders, that’s the way the “system” is set up.

There is no free lunch. Someone is paying for your necessary services which you legally must have third parties perform in order to complete your RE transaction. It’s actually a “good thing” that YSP’s exist, because if they didn’t, every single borrower would be paying for (or financing, on top of their P&I) their own closing costs. That’s the way it used to be back in the dark ages (’80’s and prior) before the use of YSP’s began to be widespread. If you didn’t have the cash to close, you weren’t able to buy (or refi). Prospective buyers were not yet ready to buy until they saved enough for their downpayment AND closing costs.

[bearishgurl]

[quote=HLS][quote=no_such_reality]
The concept is simple, the execution historically has been fraught with deception and poor ethics.

YSP still clouds the issue for the end consumer and obscures how much is really being paid for services particularly when tagged with the above, IMO.[/quote]

Those days are long gone with BROKERS….
the process is highly regulated now.
If you are offered a loan with 100% clear terms, what your net cost is, whether you pay OR get no cost,
What is unclear about this ? What does YSP have to do with it ? Are you concerned about what someone is making regardless of what they are offering you ?

FYI
Banks & Direct lenders can screw you as they can manipulate their pricing.

Mortgage brokers are like Insurance brokers.
Lenders & Insurance companies control the pricing. Insurance agents don’t discount the insurance company pricing nor do they charge you extra.
They get compensated by the insurance companies.

There are 2 kinds of mortgage BROKER compensation.
Lender paid OR borrower paid.
With lender paid the wholesale lender compensates us a % of the loan amount.
With borrower paid the borrower compensates the broker and gets the exact same pricing. It’s HIGHLY regulated.

Whether you want a rate that is higher or lower doesn’t affect BROKER compensation by 1 penny.
Any credits or cost is to/from the borrower.

The days of BROKERS benefiting from overcharging borrowers are long gone, although some brokers make a higher % than others.
Banks and direct lenders can still get away with things that a BROKER cannot.
Bank employees generally do not have access to true pricing. They only see the retail rates to offer consumers and have no idea about net pricing.
There is a difference between regulations for Banks/ Direct Lenders vs. Brokers[/quote]I just saw this after responding to the same post. Well said with more (current) additions.

[PCinSD]

[quote=bearishgurl][quote=no_such_reality][quote=flu]Yeah, I don’t quite get what the issue is. If you want to refinance, you can either get a loan with no out of pocket payments with rate X or if you want to pay closing costs and points, you can get rate Y where Y is less than X.

There’s nothing deceptive about this.[/quote]

The concept is simple, the execution historically has been fraught with deception and poor ethics.

YSP still clouds the issue for the end consumer and obscures how much is really being paid for services particularly when tagged with the above, IMO.[/quote]NSR, escrows aren’t “rocket science.” In the absence of being in the middle of refi for purchasing RE, one is certainly free to call around and/or visit websites of local escrow companies, title companies who do business in your county and whichever lenders who have products you are interested in looking into. They and/or their site will TELL you how much their ALTA and CLTA rates are per $10K or $100K of your loan or purchase price, what is customarily paid in CA by the buyer and the seller or split between the two, typical escrow fees for your loan amount or purchase price, loan or buy-down fees, doc drawing fees, typical appraisal fees (whether in-house or contracted), even tax service fees and typical notary fees for your transaction! Upon shopping for mortgages, you should easily be able to see which lenders have a lot of “garbage charges” and who doesn’t and the reasons why in each case.

In CA, all your ancillary fees are the SAME to you as the seller or buyer/borrower whether or not you even take out a purchase money mortgage or WHO contracts for them (seller’s choice, buyer’s choice, escrow company’s choice (which may be a subsidiary of a title company), or the lender who is paying for all of it (providing it to their borrower-client “free”).

If your lender provides all your ancillary services for “free,” they are certainly going to exercise their right to contract with services of their choice and yes, they may have a financial stake in some of the service providers they opt to use. But ALL of these tasks still must get done, whoever does them, and, in this case, the borrower isn’t paying for it. For example, there isn’t that much difference in title insurance fees from one title company to another. One or two in each county have their own plants but every one of them has to get their info from the same horse’s mouth …. that is, your county recorder and assessor’s office.

The inner workings of YSP between lenders and boots-on-the-ground mortgage brokers, originators and bankers are not well understood or generally known to the public and it doesn’t matter (except when they were an exorbitant 5-12% during the exotic mortgage, fog-a-mirror, get-a loan era). During those years, NINA mortgages were commonly (fraudulently) made to people with a known (to the mortgage broker) falsified mortgage application and supporting docs (often prepared for the lender’s underwriter by the broker’s own processor). This was all engineered to line the pockets of shady, greedy mortgage brokers when their clients agreed to the terms of exploding mortgages due to having bad credit or no credit and often needing “rescuing” from imminent foreclosure. Many of these mortgage brokers have since had their licenses suspended or revoked … for good reason.

YSP is the same principle as buying a new vehicle from a dealer who is selling it to you for well under True Car and Edmund’s price points for your area because the vehicle mfr will compensate them after the sale thru the back end (thru a bonus or “kickback”). As a new vehicle buyer, you don’t CARE about this nor do you have any control over it! You only care about the terms of your OWN deal. These “bonuses” aren’t well known or understood by the new vehicle-buying public but it doesn’t matter, because, just as with mortgage brokers, mortgage bankers and lenders, that’s the way the “system” is set up.

There is no free lunch. Someone is paying for your necessary services which you legally must have third parties perform in order to complete your RE transaction. It’s actually a “good thing” that YSP’s exist, because if they didn’t, every single borrower would be paying for (or financing, on top of their P&I) their own closing costs. That’s the way it used to be back in the dark ages (’80’s and prior) before the use of YSP’s began to be widespread. If you didn’t have the cash to close, you weren’t able to buy (or refi). Prospective buyers were not yet ready to buy until they saved enough for their downpayment AND closing costs.[/quote]

tl;dr

[Author]

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