Mortgage Rates

[SD Realtor]

Hi Eagle –

No I am not Jim. Jim is Jim.

[(former)FormerSanDiegan]

The focus here has been on conforming rates.

What’s happening in JUMBO-land (above the Jumbo-conforming rate, e.g. 800K) for well-qualified folks (say 800 credit score and 75% LTV) ?

It seems to me that the ultimate depth of the coastal area pricing will depend on this.

[(former)FormerSanDiegan]

The focus here has been on conforming rates.

What’s happening in JUMBO-land (above the Jumbo-conforming rate, e.g. 800K) for well-qualified folks (say 800 credit score and 75% LTV) ?

It seems to me that the ultimate depth of the coastal area pricing will depend on this.

[(former)FormerSanDiegan]

The focus here has been on conforming rates.

What’s happening in JUMBO-land (above the Jumbo-conforming rate, e.g. 800K) for well-qualified folks (say 800 credit score and 75% LTV) ?

It seems to me that the ultimate depth of the coastal area pricing will depend on this.

[(former)FormerSanDiegan]

The focus here has been on conforming rates.

What’s happening in JUMBO-land (above the Jumbo-conforming rate, e.g. 800K) for well-qualified folks (say 800 credit score and 75% LTV) ?

It seems to me that the ultimate depth of the coastal area pricing will depend on this.

[(former)FormerSanDiegan]

The focus here has been on conforming rates.

What’s happening in JUMBO-land (above the Jumbo-conforming rate, e.g. 800K) for well-qualified folks (say 800 credit score and 75% LTV) ?

It seems to me that the ultimate depth of the coastal area pricing will depend on this.

[HLS]

I don’t have any great programs at the moment for 30 yr fixed, at the moment, it is ugly.
Like 8.00% + anything over $546K

Again it depends on qualifying and the allowable debt ratios aren’t as high.

There are shorter term ARMS that are available for considerably less in rate.

I’m going to find some other options at better rates….

HLS

[HLS]

I don’t have any great programs at the moment for 30 yr fixed, at the moment, it is ugly.
Like 8.00% + anything over $546K

Again it depends on qualifying and the allowable debt ratios aren’t as high.

There are shorter term ARMS that are available for considerably less in rate.

I’m going to find some other options at better rates….

HLS

[HLS]

I don’t have any great programs at the moment for 30 yr fixed, at the moment, it is ugly.
Like 8.00% + anything over $546K

Again it depends on qualifying and the allowable debt ratios aren’t as high.

There are shorter term ARMS that are available for considerably less in rate.

I’m going to find some other options at better rates….

HLS

[HLS]

I don’t have any great programs at the moment for 30 yr fixed, at the moment, it is ugly.
Like 8.00% + anything over $546K

Again it depends on qualifying and the allowable debt ratios aren’t as high.

There are shorter term ARMS that are available for considerably less in rate.

I’m going to find some other options at better rates….

HLS

[HLS]

I don’t have any great programs at the moment for 30 yr fixed, at the moment, it is ugly.
Like 8.00% + anything over $546K

Again it depends on qualifying and the allowable debt ratios aren’t as high.

There are shorter term ARMS that are available for considerably less in rate.

I’m going to find some other options at better rates….

HLS

[cooperthedog]

[quote=asianautica]
cooperthedog, FYI, this all started with this question:
[quote=donaldduckmoore]HLS, can I have your email address. I am interested in the 30yr at 5.0. Is that a 0 pt 0 fee loan?[/quote]
Then I concur with HLS’s answer:
[quote=HLS]You NEVER get the best rate when you get a no cost loan.[/quote][/quote]

And I concur with your concurrecny! You NEVER get the best rate, but that does not mean you received the best “deal” for your particular situation. The lowest cost loan is ALWAYS the one you pay the least for over the life of the note, and this is dependent on the holding period in relation to rates, pts, etc.

[quote=asianautica]
Then there’s this comment:
[quote=carlsbadworker]However, I don’t think “it is extremely foolish to want a no cost or no fee loan, gambling that rates will go lower.” It really depends on individual situation (e.g. how much cash you have on hand, what job security youhave, what is your overall financial plan, etc).
[/quote]

So, now that you have the history of this debate, you might understand where my POV is coming from. Like I’ve said a couple of time in this thread, if you tend to flip, then it’s a no brainer that points are not for you.

FYI, your calculation is a little bit off. You do not get the whole 30 years to get $90k out of the initial $3900 in fees. You get a year to get $90k. Since after a year, the person who paid $3900 in fees would save $3900 in monthly payment too. So after 1 year, both people would have $3900 to invest. Then, you would also have to calculate in the tax the person who didn’t pay points and fees have to pay from the earning they’ve made. [/quote]

The 90k in interest savings is ONLY achieved after 30 years. As you point out, 3900 is saved the first year (the breakeven point), the amount saved thereafter declines each year (as more principal is paid), reaching 90k only after 30 years. Thus, you do not need to make 90k on the savings (3900) from the no-cost loan in the first year.

I didn’t include taxes on the no-cost loan investment earnings as it is *roughly* offset by the tax writeoffs of additional interest paid on the no-cost loan.

[quote=asianautica]
Lets take your “typical” scenario with 1 points = to 5% rate vs 0 points = 5.25% rate. With a 5% rate, you pay $373k over the life of the loan. While 5.25% rate, you pay $395k over the life of the loan. So that’s a difference of $22k. 1 points is about $4000, correct? The monthly saving from a 5% rate is $61/month. It would take ~6 years to break even. So, the question then become can you make $22k in 6 years from the $4000 capital that you didn’t use in points? By my calculation, assuming you hold your investments over a year to get long term cap gain, instead of short term cap gain, you would have to get around 35% a year to break even if you didn’t get the points. This also assume that you hold on to your property/loan till you pay it off. It would change drastically if you plan to sell int after 5-7 years. Then obviously, it wouldn’t make sense to pay 1 points to only get .25% in rate deduction.
[/quote]

You don’t need to make 22k in ~6 years from your 4k in saved capital (35% ROI), in fact by definition, you can have a 0% ROI and breakeven in ~6 years. So the no-cost loan (with that specific spread) is the “better” loan *if* you happen to sell/refi within 6 years. At an 11% ROI, the breakeven is 8 years.

The higher your ROI, the longer the breakeven, and the more attractive the no-cost loan (if, and only if, you’re not holding the loan past breakeven, since a higher ROI (up to a point) will produce much better results for the buydown if held to term). This includes investing the $61/month saved by the buydown at the same ROI as the 4k.

Also, the opportunity cost of paying points isn’t as dramatic as adjusting down payments.

[quote=asianautica]
The way I see it is, the only reason why you’d want a no points no fees = no cost loan is if you’re betting that rates will go down soon or if you’re flipping.[/quote]

This isn’t necessarily the case. My issue was with blanket statments. I prefer to crunch the numbers to verify which option is the best for various scenarios.

[cooperthedog]

[quote=asianautica]
cooperthedog, FYI, this all started with this question:
[quote=donaldduckmoore]HLS, can I have your email address. I am interested in the 30yr at 5.0. Is that a 0 pt 0 fee loan?[/quote]
Then I concur with HLS’s answer:
[quote=HLS]You NEVER get the best rate when you get a no cost loan.[/quote][/quote]

And I concur with your concurrecny! You NEVER get the best rate, but that does not mean you received the best “deal” for your particular situation. The lowest cost loan is ALWAYS the one you pay the least for over the life of the note, and this is dependent on the holding period in relation to rates, pts, etc.

[quote=asianautica]
Then there’s this comment:
[quote=carlsbadworker]However, I don’t think “it is extremely foolish to want a no cost or no fee loan, gambling that rates will go lower.” It really depends on individual situation (e.g. how much cash you have on hand, what job security youhave, what is your overall financial plan, etc).
[/quote]

So, now that you have the history of this debate, you might understand where my POV is coming from. Like I’ve said a couple of time in this thread, if you tend to flip, then it’s a no brainer that points are not for you.

FYI, your calculation is a little bit off. You do not get the whole 30 years to get $90k out of the initial $3900 in fees. You get a year to get $90k. Since after a year, the person who paid $3900 in fees would save $3900 in monthly payment too. So after 1 year, both people would have $3900 to invest. Then, you would also have to calculate in the tax the person who didn’t pay points and fees have to pay from the earning they’ve made. [/quote]

The 90k in interest savings is ONLY achieved after 30 years. As you point out, 3900 is saved the first year (the breakeven point), the amount saved thereafter declines each year (as more principal is paid), reaching 90k only after 30 years. Thus, you do not need to make 90k on the savings (3900) from the no-cost loan in the first year.

I didn’t include taxes on the no-cost loan investment earnings as it is *roughly* offset by the tax writeoffs of additional interest paid on the no-cost loan.

[quote=asianautica]
Lets take your “typical” scenario with 1 points = to 5% rate vs 0 points = 5.25% rate. With a 5% rate, you pay $373k over the life of the loan. While 5.25% rate, you pay $395k over the life of the loan. So that’s a difference of $22k. 1 points is about $4000, correct? The monthly saving from a 5% rate is $61/month. It would take ~6 years to break even. So, the question then become can you make $22k in 6 years from the $4000 capital that you didn’t use in points? By my calculation, assuming you hold your investments over a year to get long term cap gain, instead of short term cap gain, you would have to get around 35% a year to break even if you didn’t get the points. This also assume that you hold on to your property/loan till you pay it off. It would change drastically if you plan to sell int after 5-7 years. Then obviously, it wouldn’t make sense to pay 1 points to only get .25% in rate deduction.
[/quote]

You don’t need to make 22k in ~6 years from your 4k in saved capital (35% ROI), in fact by definition, you can have a 0% ROI and breakeven in ~6 years. So the no-cost loan (with that specific spread) is the “better” loan *if* you happen to sell/refi within 6 years. At an 11% ROI, the breakeven is 8 years.

The higher your ROI, the longer the breakeven, and the more attractive the no-cost loan (if, and only if, you’re not holding the loan past breakeven, since a higher ROI (up to a point) will produce much better results for the buydown if held to term). This includes investing the $61/month saved by the buydown at the same ROI as the 4k.

Also, the opportunity cost of paying points isn’t as dramatic as adjusting down payments.

[quote=asianautica]
The way I see it is, the only reason why you’d want a no points no fees = no cost loan is if you’re betting that rates will go down soon or if you’re flipping.[/quote]

This isn’t necessarily the case. My issue was with blanket statments. I prefer to crunch the numbers to verify which option is the best for various scenarios.

[cooperthedog]

[quote=asianautica]
cooperthedog, FYI, this all started with this question:
[quote=donaldduckmoore]HLS, can I have your email address. I am interested in the 30yr at 5.0. Is that a 0 pt 0 fee loan?[/quote]
Then I concur with HLS’s answer:
[quote=HLS]You NEVER get the best rate when you get a no cost loan.[/quote][/quote]

And I concur with your concurrecny! You NEVER get the best rate, but that does not mean you received the best “deal” for your particular situation. The lowest cost loan is ALWAYS the one you pay the least for over the life of the note, and this is dependent on the holding period in relation to rates, pts, etc.

[quote=asianautica]
Then there’s this comment:
[quote=carlsbadworker]However, I don’t think “it is extremely foolish to want a no cost or no fee loan, gambling that rates will go lower.” It really depends on individual situation (e.g. how much cash you have on hand, what job security youhave, what is your overall financial plan, etc).
[/quote]

So, now that you have the history of this debate, you might understand where my POV is coming from. Like I’ve said a couple of time in this thread, if you tend to flip, then it’s a no brainer that points are not for you.

FYI, your calculation is a little bit off. You do not get the whole 30 years to get $90k out of the initial $3900 in fees. You get a year to get $90k. Since after a year, the person who paid $3900 in fees would save $3900 in monthly payment too. So after 1 year, both people would have $3900 to invest. Then, you would also have to calculate in the tax the person who didn’t pay points and fees have to pay from the earning they’ve made. [/quote]

The 90k in interest savings is ONLY achieved after 30 years. As you point out, 3900 is saved the first year (the breakeven point), the amount saved thereafter declines each year (as more principal is paid), reaching 90k only after 30 years. Thus, you do not need to make 90k on the savings (3900) from the no-cost loan in the first year.

I didn’t include taxes on the no-cost loan investment earnings as it is *roughly* offset by the tax writeoffs of additional interest paid on the no-cost loan.

[quote=asianautica]
Lets take your “typical” scenario with 1 points = to 5% rate vs 0 points = 5.25% rate. With a 5% rate, you pay $373k over the life of the loan. While 5.25% rate, you pay $395k over the life of the loan. So that’s a difference of $22k. 1 points is about $4000, correct? The monthly saving from a 5% rate is $61/month. It would take ~6 years to break even. So, the question then become can you make $22k in 6 years from the $4000 capital that you didn’t use in points? By my calculation, assuming you hold your investments over a year to get long term cap gain, instead of short term cap gain, you would have to get around 35% a year to break even if you didn’t get the points. This also assume that you hold on to your property/loan till you pay it off. It would change drastically if you plan to sell int after 5-7 years. Then obviously, it wouldn’t make sense to pay 1 points to only get .25% in rate deduction.
[/quote]

You don’t need to make 22k in ~6 years from your 4k in saved capital (35% ROI), in fact by definition, you can have a 0% ROI and breakeven in ~6 years. So the no-cost loan (with that specific spread) is the “better” loan *if* you happen to sell/refi within 6 years. At an 11% ROI, the breakeven is 8 years.

The higher your ROI, the longer the breakeven, and the more attractive the no-cost loan (if, and only if, you’re not holding the loan past breakeven, since a higher ROI (up to a point) will produce much better results for the buydown if held to term). This includes investing the $61/month saved by the buydown at the same ROI as the 4k.

Also, the opportunity cost of paying points isn’t as dramatic as adjusting down payments.

[quote=asianautica]
The way I see it is, the only reason why you’d want a no points no fees = no cost loan is if you’re betting that rates will go down soon or if you’re flipping.[/quote]

This isn’t necessarily the case. My issue was with blanket statments. I prefer to crunch the numbers to verify which option is the best for various scenarios.

[cooperthedog]

[quote=asianautica]
cooperthedog, FYI, this all started with this question:
[quote=donaldduckmoore]HLS, can I have your email address. I am interested in the 30yr at 5.0. Is that a 0 pt 0 fee loan?[/quote]
Then I concur with HLS’s answer:
[quote=HLS]You NEVER get the best rate when you get a no cost loan.[/quote][/quote]

And I concur with your concurrecny! You NEVER get the best rate, but that does not mean you received the best “deal” for your particular situation. The lowest cost loan is ALWAYS the one you pay the least for over the life of the note, and this is dependent on the holding period in relation to rates, pts, etc.

[quote=asianautica]
Then there’s this comment:
[quote=carlsbadworker]However, I don’t think “it is extremely foolish to want a no cost or no fee loan, gambling that rates will go lower.” It really depends on individual situation (e.g. how much cash you have on hand, what job security youhave, what is your overall financial plan, etc).
[/quote]

So, now that you have the history of this debate, you might understand where my POV is coming from. Like I’ve said a couple of time in this thread, if you tend to flip, then it’s a no brainer that points are not for you.

FYI, your calculation is a little bit off. You do not get the whole 30 years to get $90k out of the initial $3900 in fees. You get a year to get $90k. Since after a year, the person who paid $3900 in fees would save $3900 in monthly payment too. So after 1 year, both people would have $3900 to invest. Then, you would also have to calculate in the tax the person who didn’t pay points and fees have to pay from the earning they’ve made. [/quote]

The 90k in interest savings is ONLY achieved after 30 years. As you point out, 3900 is saved the first year (the breakeven point), the amount saved thereafter declines each year (as more principal is paid), reaching 90k only after 30 years. Thus, you do not need to make 90k on the savings (3900) from the no-cost loan in the first year.

I didn’t include taxes on the no-cost loan investment earnings as it is *roughly* offset by the tax writeoffs of additional interest paid on the no-cost loan.

[quote=asianautica]
Lets take your “typical” scenario with 1 points = to 5% rate vs 0 points = 5.25% rate. With a 5% rate, you pay $373k over the life of the loan. While 5.25% rate, you pay $395k over the life of the loan. So that’s a difference of $22k. 1 points is about $4000, correct? The monthly saving from a 5% rate is $61/month. It would take ~6 years to break even. So, the question then become can you make $22k in 6 years from the $4000 capital that you didn’t use in points? By my calculation, assuming you hold your investments over a year to get long term cap gain, instead of short term cap gain, you would have to get around 35% a year to break even if you didn’t get the points. This also assume that you hold on to your property/loan till you pay it off. It would change drastically if you plan to sell int after 5-7 years. Then obviously, it wouldn’t make sense to pay 1 points to only get .25% in rate deduction.
[/quote]

You don’t need to make 22k in ~6 years from your 4k in saved capital (35% ROI), in fact by definition, you can have a 0% ROI and breakeven in ~6 years. So the no-cost loan (with that specific spread) is the “better” loan *if* you happen to sell/refi within 6 years. At an 11% ROI, the breakeven is 8 years.

The higher your ROI, the longer the breakeven, and the more attractive the no-cost loan (if, and only if, you’re not holding the loan past breakeven, since a higher ROI (up to a point) will produce much better results for the buydown if held to term). This includes investing the $61/month saved by the buydown at the same ROI as the 4k.

Also, the opportunity cost of paying points isn’t as dramatic as adjusting down payments.

[quote=asianautica]
The way I see it is, the only reason why you’d want a no points no fees = no cost loan is if you’re betting that rates will go down soon or if you’re flipping.[/quote]

This isn’t necessarily the case. My issue was with blanket statments. I prefer to crunch the numbers to verify which option is the best for various scenarios.

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