3.75 vs 4.00

[bearishgurl]

[quote=flu][quote=bearishgurl][quote=FlyerInHi]Flu, I think you’re saying that “no cost” loans are better because they allow you to refinance again and again, guilt free (loss avoidance. You’re not “throwing away” out of pocket fees. That’s the marketing angle.

But past is past. Make decisions based on what you know today.[/quote]

In response to the italicized portion, maybe so. But a person who is a “serial refinancer” is still starting over again at 30 years every single time they refinance … that is, unless they choose a 15-year loan (with much higher payments). However, the vast majority of refinancers do so for the express purpose of lowering their monthly payments (thereby increasing monthly cash flow).[/quote]

God, I am not saying no cost loans are always better. I am saying it depends on your situation which depends heavily on whether you want/can pay more up front or want to pay over the long term, and use more of your upfront cash for something else.

Sheesh.[/quote]I agree that if they truly come at “no cost” to the consumer, than they are “better” for most people who won’t hold the property for the long term (meaning 12+ years).

How much the broker does or doesn’t make for procuring, preparing, processing and submitting a borrower’s mortgage loan app and supporting docs and placing their rate lock is immaterial because there is nothing the consumer can change about this system. As of April 1, 2011, an independent mortgage broker’s lender-paid compensation has been based upon loan amount only, NOT terms … as it was in the past. This provision was put in place to keep this group of brokers from being tempted to put unsophisticated borrowers in mortgage programs they have no business being in for the sole purpose of earning a higher YSP.

The new rule is known as the Loan Originator Compensation amendment to Regulation Z, part of a strengthened Truth in Lending Act passed by Congress in 2008. Designed to prevent consumers from being steered into high-cost, risky loans, it covers how a loan originator — or any person or company that arranges, obtains and/or negotiates a mortgage for a client — is paid.

Under the new rule, a lender can no longer pay a loan originator a lucrative rebate known as a yield-spread premium, which is tied to the rate or terms of the mortgage. Banks and other lenders can continue to pay commissions to brokers, but these payments must now be based solely on the loan amount.

In the past, the higher the interest rate and points, the more money a broker stood to earn….

(emphasis mine)

A borrower either wants to work with a mortgage broker who will shop the best loan for their circumstances … or they don’t. A borrower can’t have it both ways, i.e. all of the above highly specialized services for “free” (to make them look good on paper to an underwriter), plus expect a kickback on closing costs (or zero closing costs) while also expecting their broker who did all the work for them to make little or nothing.

There are very few institutional lenders anymore. And even their mortgage loan officers get paid by the institutions relative to their production. A mortgage borrower also has far fewer choices today on the types of mortgages actually available on the open market and the terms under which they can get them. If a borrower doesn’t like how the new “system” works, they are always free to pay cash for their RE purchase :=]

[livinincali]

[quote=AN][quote=FlyerInHi]Flu, I think you’re saying that “no cost” loans are better because they allow you to refinance again and again, guilt free (loss avoidance. You’re not “throwing away” out of pocket fees. That’s the marketing angle.

But past is past. Make decisions based on what you know today.[/quote]
Do you have a crystal ball i can borrow?[/quote]

It’s probably safe to assume that secular trend of steadily lower and lower rates from the early 1980’s until now is coming to an end. Not that rates will rise significantly from here but mid 2’s maybe 2 is probably the lower limit. It might make sense to pay a little bit for a lower rate now where as in the past 30 years it probably didn’t. Of course you didn’t necessarily know that at the time.

[scaredyclassic]

it’s just too painful to pay extra cash for a discount you might have gotten free in the next couple months, regardless of the math involved. refi with a rebate just feels better.

I did a refi at the for now bottom in early 2013, and if that really is the bottom, yeah, I should’ve paid tax deductible money to get it even a little lower instead of taking a large rebate. yet i dot feel nearly as bad about that possibility of lost gain as I would had i written a large check and rates kept chugging downward, even if the potential gain exceeded the potential loss.

. the problem is it’s just very very difficult to write a check at the time of the refi, and very very easy to accept money, esp. when you can look at a graph and see the trend is down, down down. . i think the psychology of the sales pitch of no cost to refi is just too compelling, even if you crunch various scenarios, plan to stay a long time, and have thought about options…

im not saying it’s a bad pitch. I’m acknowledging its tremendous power, even among the somewhat analytical.

the psychologists tell us that humans are wired much more strongly to have an aversion to losing money than to feel pleasure at gaining money, even if the math says take a risk. we hate losing stuff. it’s probably wired into us evolutionarily. a bird in the hand is worth two in the bush, if you’re trying to survive as a proto human on the african savannah plain. or in the jungle of the refi market.

[Anonymous]

Kahneman is a good read.

[an]

[quote=livinincali][quote=AN][quote=FlyerInHi]Flu, I think you’re saying that “no cost” loans are better because they allow you to refinance again and again, guilt free (loss avoidance. You’re not “throwing away” out of pocket fees. That’s the marketing angle.

But past is past. Make decisions based on what you know today.[/quote]
Do you have a crystal ball i can borrow?[/quote]

It’s probably safe to assume that secular trend of steadily lower and lower rates from the early 1980’s until now is coming to an end. Not that rates will rise significantly from here but mid 2’s maybe 2 is probably the lower limit. It might make sense to pay a little bit for a lower rate now where as in the past 30 years it probably didn’t. Of course you didn’t necessarily know that at the time.[/quote]
That’s exactly what I thought 8 years ago when it was at 4.75% and I paid dearly to get it down to 4.5%. I had the same think you just laid out. I stop trying to time the bottom. Also, at 1/8%, we’re talking about $13k over 30 years, which isn’t big enough of a saving to take the risk by paying ~$2500 for. IMHO.
This isn’t considering what inflation look like over the next 30 years. $2500 is today $, while the $13k saving is over 30 years. If we experience another 70s/80s high inflation period, then the saving isn’t all that big.

[NotCranky]

Crystal ball?
http://www.freddiemac.com/news/blog/sean_becketti/20160104_housing_sector.html

[an]

[quote=Blogstar]Crystal ball?
http://www.freddiemac.com/news/blog/sean_becketti/20160104_housing_sector.html%5B/quote%5D
Exactly. In 2008, fed fund rate was at near 0%, mortgage rate was @ 5%, lowest in at least 28 years base on that chart (since it only goes back to 1980), but I’m sure it’s lowest in >30 years. So, base on all those parameters, would you have guess rate would have dropped from 5% to 3.5% in the next 8 years? Hind sight is 20/20. Which is why I said my crystal is broken.

[FlyerInHi]

When the stimulus was signed into law in 2009, lots of people were so convinced that there would be hyperinflation, skyrocketing rates, dollar debasement. Ron Paul was leading the charge.

Respected economists looked at the capacity overhang and consumer pullback. They predicted no calamity and asked for even more stimulus to help the economy recover faster. Bernanke asked for fiscal help. Of course, the economists were correct.

I went with adjustable on my San Diego place.

Today, China is flooding the maket with trillions of dollars. Some of that money will end up in US mortgages. So I think we’ll have a couple more years of low rates which will be good for housing.

[livinincali]

[quote=FlyerInHi]
So I think we’ll have a couple more years of low rates which will be good for housing.[/quote]

We could have a really long period of low rates. That’s probably good for the housing market to a degree but it isn’t as good as the previous 3 decades of continually falling rates.

[FlyerInHi]

I didn’t want to go out too much on a limb. I think we will have a long period of low rates because there is too much capacity. Vietnam, Burma, then Africa will be the new China producing cheap stuff.

Europe and Japan are paralysed. Brexit is a risk. We have dysfunctions and can’t drive world growth alone. Brazil and Russia are imploding.

Maybe China will be able to engineer a consumer economy pivot.

What better time to build infrastructure? The USA should really go out on an infrastructure binge to help growth.

[livinincali]

[quote=FlyerInHi]
What better time to build infrastructure? The USA should really go out on an infrastructure binge to help growth.[/quote]

Well as long as it’s useful infrastructure and doesn’t involve massively overpaying for it. Of course we like to spend billions on building high speed train tracks from Madera to Fresno County. China likes to build empty cities and Japan builds bridges to nowhere. Productive infrastructure investment sure. Governments figuring out what’s productive, not so much.

[no_such_reality]

30 year rates drifting down?

[bewildering]

http://www.mortgagenewsdaily.com/mortgage_rates/daily.aspx

Almost at the 52 week low.

[Balboa]

Does anyone actually get this lowest daily rate? Right this moment we are filling out a loan docs and the stated rate is 4%. We do need a bit of special handling because we have shortened contingencies and may do a 21-day close. But we also have 20% down on a conforming loan with 800+ credit scores. Seems like we’d be good candidates for the best rate possible…

[bewildering]

[quote=Balboa]Does anyone actually get this lowest daily rate? Right this moment we are filling out a loan docs and the stated rate is 4%. We do need a bit of special handling because we have shortened contingencies and may do a 21-day close. But we also have 20% down on a conforming loan with 800+ credit scores. Seems like we’d be good candidates for the best rate possible…[/quote]

Yes. People get these rates. But the rate depends when you got your quote, what you are buying, your income, and your lender.

I got my nice rates through some random bank suggested by Zillow. My existing lender quoted me 0.5% higher than the online place.

[Author]

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