To use the FHA bailout his new appraisal would have to come in at 775K or less (for a 697K FHA limit loan).
A new loan would be at least 6.5%, plus the 1.5% annual fee and 50% of future appreciation. He’s better off keeping the ultra-low 4.375% loan for the next 4 years. What a deal !
I wouldn;t characterize this guys situation as being screwed. fact, I think he’s in an excellent position. He apparently has a million in assets outside his property. Plus he has a 4.375% loan for the next 4 years. 3700 bucks per month interest, plus taxes and insurance, so maybe $4800 per month or so. In 40% combined tax bracket, after taxes it’s probably $3100 per month. Maybe cheaper than renting. Plus, since it’s a purchase loan he has no additional downside risk of loss beyond whatever down payment he made.
I don’t think this guy should be losing any sleep. He’s not screwed at all.
After 4 years he can take his $1 MIllion assets plus whatever gains (maybe 1.2 M after 4 years) and pay off the loan if it resets too high. OR if his house dropped in half or more by price, he can walk away, and buy his house as a REO or buy a similar one using all cash, and still have about 700K left laying around.
It’s really a no-lose proposition for people in his situation.
After 4 years he can take his $1 MIllion assets plus whatever gains (maybe 1.2 M after 4 years) and pay off the loan if it resets too high. OR if his house dropped in half or more by price, he can walk away, and buy his house as a REO or buy a similar one using all cash, and still have about 700K left laying around.
It’s really a no-lose proposition for people in his situation.
After 4 years he can take his $1 MIllion assets plus whatever gains (maybe 1.2 M after 4 years) and pay off the loan if it resets too high. OR if his house dropped in half or more by price, he can walk away, and buy his house as a REO or buy a similar one using all cash, and still have about 700K left laying around.
It’s really a no-lose proposition for people in his situation.
After 4 years he can take his $1 MIllion assets plus whatever gains (maybe 1.2 M after 4 years) and pay off the loan if it resets too high. OR if his house dropped in half or more by price, he can walk away, and buy his house as a REO or buy a similar one using all cash, and still have about 700K left laying around.
It’s really a no-lose proposition for people in his situation.
After 4 years he can take his $1 MIllion assets plus whatever gains (maybe 1.2 M after 4 years) and pay off the loan if it resets too high. OR if his house dropped in half or more by price, he can walk away, and buy his house as a REO or buy a similar one using all cash, and still have about 700K left laying around.
It’s really a no-lose proposition for people in his situation.
