Mortgage Rates

[donaldduckmoore]

Asianautica,as a customer, one always wants to get the best deal. Lots of homeonwners that are qualified and having capitals are still searching for a good deal and that do not mean that they cannot afford something. I think asianautica needs to differentiate the difference. I am having a 6% right now, and I want to search for something that is signifcantly lower, and I am not in a hurry, something wrong there? Besides, even if you have several grands in your hands, does it mean that you have to spend it anyway if there are choices? That seems the american way of spending coming back already. Furthermore, spending a few thousand bucks may not necessarily save you a lot in the future. You have to be wise to choose. If you pay thousands of dollars just to enough to save you $20 a month. It is not a good investment and why not wait a little longer. Have you done a refi before?

[an]

donaldduckmoore, I think you misunderstood my point. IF you’re a person who are buying a house right now and you want to get the best rates. What I’m trying to say is, the “best” rate will always come with points. Whether it’s worth to get those points or not depends on how long you want to stay in the house. Here’s an example, right now if you buy a $500k house w/ 20% down, using aimloan.com, you can get 5.25% w/ 0 points, but with all the fees, you’re looking at $3910 at closing. If you want 0 points 0 fees, i.e. no cost to you at closing, you’d have to pay around 6.25%. It would take out about 1 year to break even with the fees of $3910. So, if you’re not flipping, it wouldn’t make any sense to get the 6.25+% just so you pay 0 point & 0 fees.

[an]

donaldduckmoore, I think you misunderstood my point. IF you’re a person who are buying a house right now and you want to get the best rates. What I’m trying to say is, the “best” rate will always come with points. Whether it’s worth to get those points or not depends on how long you want to stay in the house. Here’s an example, right now if you buy a $500k house w/ 20% down, using aimloan.com, you can get 5.25% w/ 0 points, but with all the fees, you’re looking at $3910 at closing. If you want 0 points 0 fees, i.e. no cost to you at closing, you’d have to pay around 6.25%. It would take out about 1 year to break even with the fees of $3910. So, if you’re not flipping, it wouldn’t make any sense to get the 6.25+% just so you pay 0 point & 0 fees.

[an]

donaldduckmoore, I think you misunderstood my point. IF you’re a person who are buying a house right now and you want to get the best rates. What I’m trying to say is, the “best” rate will always come with points. Whether it’s worth to get those points or not depends on how long you want to stay in the house. Here’s an example, right now if you buy a $500k house w/ 20% down, using aimloan.com, you can get 5.25% w/ 0 points, but with all the fees, you’re looking at $3910 at closing. If you want 0 points 0 fees, i.e. no cost to you at closing, you’d have to pay around 6.25%. It would take out about 1 year to break even with the fees of $3910. So, if you’re not flipping, it wouldn’t make any sense to get the 6.25+% just so you pay 0 point & 0 fees.

[an]

donaldduckmoore, I think you misunderstood my point. IF you’re a person who are buying a house right now and you want to get the best rates. What I’m trying to say is, the “best” rate will always come with points. Whether it’s worth to get those points or not depends on how long you want to stay in the house. Here’s an example, right now if you buy a $500k house w/ 20% down, using aimloan.com, you can get 5.25% w/ 0 points, but with all the fees, you’re looking at $3910 at closing. If you want 0 points 0 fees, i.e. no cost to you at closing, you’d have to pay around 6.25%. It would take out about 1 year to break even with the fees of $3910. So, if you’re not flipping, it wouldn’t make any sense to get the 6.25+% just so you pay 0 point & 0 fees.

[an]

donaldduckmoore, I think you misunderstood my point. IF you’re a person who are buying a house right now and you want to get the best rates. What I’m trying to say is, the “best” rate will always come with points. Whether it’s worth to get those points or not depends on how long you want to stay in the house. Here’s an example, right now if you buy a $500k house w/ 20% down, using aimloan.com, you can get 5.25% w/ 0 points, but with all the fees, you’re looking at $3910 at closing. If you want 0 points 0 fees, i.e. no cost to you at closing, you’d have to pay around 6.25%. It would take out about 1 year to break even with the fees of $3910. So, if you’re not flipping, it wouldn’t make any sense to get the 6.25+% just so you pay 0 point & 0 fees.

[cooperthedog]

[quote=HLS]You NEVER get the best rate when you get a no cost loan.
It is a very misleading concept.

There are no fee loans, there are no cost loans.
They are not the same thing. With either of these you are getting a higher rate, which equates to a higher rate and a higher payment for 30 years.
With rates now just above historical lows, I think it is extremely foolish to want a no cost or no fee loan, gambling that rates will go lower.
[/quote]

Your comment about *never* getting the best rate needs to be qualified. The *best* loan will be the one that costs the least over the time held. Thus, a no cost loan will be better for those with a shorter time horizon, even if the rate is higher. The key variable is how long one expects to be hold the loan.

For example, here are two hypothetical 30 year loans:

Loan A (points & fees): 5% rate, with 6k in pts/fees/closing. APR = ~5.2%
Loan B (true no cost): 5.5% rate, $0 pts/fees/closing. APR = 5.5%

Scenarios:
> Owner holds for one year, then sells or refis at a lower rate. Loan A’s true APR jumps to 8.8% (due to amortizing fees over 1 year vs. 30). Loan B’s APR remains unchanged at 5.5%.

> 3 year holding period, Loan A = 6.4%, B = 5.5%

> 5 years is ~ breakeven, Loan A = 5.4%, B = 5.5%

> Over the next 25 years the APR on loan A will be reduced slowly to 5.2% resulting in greater & greater savings over loan B.

Generally, the more spread between the rate and APR, the larger the fees and the longer the breakeven point (vs. lower fee, higher rate/APR loans). If you think you’ll be there over a decade, then shop by the lowest APR, if your time frame is < 5 years, shop for the best rate with the lowest fees. Either time frame carries risk, as planning to stay for the long haul may be interrupted by job loss, relocation, family crisis, etc., while expecting to move/refi within 5 years may not be possible due to credit issues, equity reduction, etc. As a general rule, I tend to want to pay as little upfront as possible. As for the foolishness of waiting for rates to drop further, if deflation worsens you could see rates substantially lower, thus making a no/low cost, fixed 30 year loan a good hedge, since you have the ability to refi down at anytime w/o losing the chunk of cash used for pts/fees but you're still locked into a good 30 yr. rate in case inflation spikes due to all the gov't intervention. Also, for refi's, a true no cost loan at a rate less then your current loan is "risk free", with the option to refinance at a lower rates in the future (should that occur) without any break-even analysis. One should crunch the numbers to verify what is best for their particular situation and determine how much risk (if any) they're willing to take on various scenarios.

[cooperthedog]

[quote=HLS]You NEVER get the best rate when you get a no cost loan.
It is a very misleading concept.

There are no fee loans, there are no cost loans.
They are not the same thing. With either of these you are getting a higher rate, which equates to a higher rate and a higher payment for 30 years.
With rates now just above historical lows, I think it is extremely foolish to want a no cost or no fee loan, gambling that rates will go lower.
[/quote]

Your comment about *never* getting the best rate needs to be qualified. The *best* loan will be the one that costs the least over the time held. Thus, a no cost loan will be better for those with a shorter time horizon, even if the rate is higher. The key variable is how long one expects to be hold the loan.

For example, here are two hypothetical 30 year loans:

Loan A (points & fees): 5% rate, with 6k in pts/fees/closing. APR = ~5.2%
Loan B (true no cost): 5.5% rate, $0 pts/fees/closing. APR = 5.5%

Scenarios:
> Owner holds for one year, then sells or refis at a lower rate. Loan A’s true APR jumps to 8.8% (due to amortizing fees over 1 year vs. 30). Loan B’s APR remains unchanged at 5.5%.

> 3 year holding period, Loan A = 6.4%, B = 5.5%

> 5 years is ~ breakeven, Loan A = 5.4%, B = 5.5%

> Over the next 25 years the APR on loan A will be reduced slowly to 5.2% resulting in greater & greater savings over loan B.

Generally, the more spread between the rate and APR, the larger the fees and the longer the breakeven point (vs. lower fee, higher rate/APR loans). If you think you’ll be there over a decade, then shop by the lowest APR, if your time frame is < 5 years, shop for the best rate with the lowest fees. Either time frame carries risk, as planning to stay for the long haul may be interrupted by job loss, relocation, family crisis, etc., while expecting to move/refi within 5 years may not be possible due to credit issues, equity reduction, etc. As a general rule, I tend to want to pay as little upfront as possible. As for the foolishness of waiting for rates to drop further, if deflation worsens you could see rates substantially lower, thus making a no/low cost, fixed 30 year loan a good hedge, since you have the ability to refi down at anytime w/o losing the chunk of cash used for pts/fees but you're still locked into a good 30 yr. rate in case inflation spikes due to all the gov't intervention. Also, for refi's, a true no cost loan at a rate less then your current loan is "risk free", with the option to refinance at a lower rates in the future (should that occur) without any break-even analysis. One should crunch the numbers to verify what is best for their particular situation and determine how much risk (if any) they're willing to take on various scenarios.

[cooperthedog]

[quote=HLS]You NEVER get the best rate when you get a no cost loan.
It is a very misleading concept.

There are no fee loans, there are no cost loans.
They are not the same thing. With either of these you are getting a higher rate, which equates to a higher rate and a higher payment for 30 years.
With rates now just above historical lows, I think it is extremely foolish to want a no cost or no fee loan, gambling that rates will go lower.
[/quote]

Your comment about *never* getting the best rate needs to be qualified. The *best* loan will be the one that costs the least over the time held. Thus, a no cost loan will be better for those with a shorter time horizon, even if the rate is higher. The key variable is how long one expects to be hold the loan.

For example, here are two hypothetical 30 year loans:

Loan A (points & fees): 5% rate, with 6k in pts/fees/closing. APR = ~5.2%
Loan B (true no cost): 5.5% rate, $0 pts/fees/closing. APR = 5.5%

Scenarios:
> Owner holds for one year, then sells or refis at a lower rate. Loan A’s true APR jumps to 8.8% (due to amortizing fees over 1 year vs. 30). Loan B’s APR remains unchanged at 5.5%.

> 3 year holding period, Loan A = 6.4%, B = 5.5%

> 5 years is ~ breakeven, Loan A = 5.4%, B = 5.5%

> Over the next 25 years the APR on loan A will be reduced slowly to 5.2% resulting in greater & greater savings over loan B.

Generally, the more spread between the rate and APR, the larger the fees and the longer the breakeven point (vs. lower fee, higher rate/APR loans). If you think you’ll be there over a decade, then shop by the lowest APR, if your time frame is < 5 years, shop for the best rate with the lowest fees. Either time frame carries risk, as planning to stay for the long haul may be interrupted by job loss, relocation, family crisis, etc., while expecting to move/refi within 5 years may not be possible due to credit issues, equity reduction, etc. As a general rule, I tend to want to pay as little upfront as possible. As for the foolishness of waiting for rates to drop further, if deflation worsens you could see rates substantially lower, thus making a no/low cost, fixed 30 year loan a good hedge, since you have the ability to refi down at anytime w/o losing the chunk of cash used for pts/fees but you're still locked into a good 30 yr. rate in case inflation spikes due to all the gov't intervention. Also, for refi's, a true no cost loan at a rate less then your current loan is "risk free", with the option to refinance at a lower rates in the future (should that occur) without any break-even analysis. One should crunch the numbers to verify what is best for their particular situation and determine how much risk (if any) they're willing to take on various scenarios.

[cooperthedog]

[quote=HLS]You NEVER get the best rate when you get a no cost loan.
It is a very misleading concept.

There are no fee loans, there are no cost loans.
They are not the same thing. With either of these you are getting a higher rate, which equates to a higher rate and a higher payment for 30 years.
With rates now just above historical lows, I think it is extremely foolish to want a no cost or no fee loan, gambling that rates will go lower.
[/quote]

Your comment about *never* getting the best rate needs to be qualified. The *best* loan will be the one that costs the least over the time held. Thus, a no cost loan will be better for those with a shorter time horizon, even if the rate is higher. The key variable is how long one expects to be hold the loan.

For example, here are two hypothetical 30 year loans:

Loan A (points & fees): 5% rate, with 6k in pts/fees/closing. APR = ~5.2%
Loan B (true no cost): 5.5% rate, $0 pts/fees/closing. APR = 5.5%

Scenarios:
> Owner holds for one year, then sells or refis at a lower rate. Loan A’s true APR jumps to 8.8% (due to amortizing fees over 1 year vs. 30). Loan B’s APR remains unchanged at 5.5%.

> 3 year holding period, Loan A = 6.4%, B = 5.5%

> 5 years is ~ breakeven, Loan A = 5.4%, B = 5.5%

> Over the next 25 years the APR on loan A will be reduced slowly to 5.2% resulting in greater & greater savings over loan B.

Generally, the more spread between the rate and APR, the larger the fees and the longer the breakeven point (vs. lower fee, higher rate/APR loans). If you think you’ll be there over a decade, then shop by the lowest APR, if your time frame is < 5 years, shop for the best rate with the lowest fees. Either time frame carries risk, as planning to stay for the long haul may be interrupted by job loss, relocation, family crisis, etc., while expecting to move/refi within 5 years may not be possible due to credit issues, equity reduction, etc. As a general rule, I tend to want to pay as little upfront as possible. As for the foolishness of waiting for rates to drop further, if deflation worsens you could see rates substantially lower, thus making a no/low cost, fixed 30 year loan a good hedge, since you have the ability to refi down at anytime w/o losing the chunk of cash used for pts/fees but you're still locked into a good 30 yr. rate in case inflation spikes due to all the gov't intervention. Also, for refi's, a true no cost loan at a rate less then your current loan is "risk free", with the option to refinance at a lower rates in the future (should that occur) without any break-even analysis. One should crunch the numbers to verify what is best for their particular situation and determine how much risk (if any) they're willing to take on various scenarios.

[cooperthedog]

[quote=HLS]You NEVER get the best rate when you get a no cost loan.
It is a very misleading concept.

There are no fee loans, there are no cost loans.
They are not the same thing. With either of these you are getting a higher rate, which equates to a higher rate and a higher payment for 30 years.
With rates now just above historical lows, I think it is extremely foolish to want a no cost or no fee loan, gambling that rates will go lower.
[/quote]

Your comment about *never* getting the best rate needs to be qualified. The *best* loan will be the one that costs the least over the time held. Thus, a no cost loan will be better for those with a shorter time horizon, even if the rate is higher. The key variable is how long one expects to be hold the loan.

For example, here are two hypothetical 30 year loans:

Loan A (points & fees): 5% rate, with 6k in pts/fees/closing. APR = ~5.2%
Loan B (true no cost): 5.5% rate, $0 pts/fees/closing. APR = 5.5%

Scenarios:
> Owner holds for one year, then sells or refis at a lower rate. Loan A’s true APR jumps to 8.8% (due to amortizing fees over 1 year vs. 30). Loan B’s APR remains unchanged at 5.5%.

> 3 year holding period, Loan A = 6.4%, B = 5.5%

> 5 years is ~ breakeven, Loan A = 5.4%, B = 5.5%

> Over the next 25 years the APR on loan A will be reduced slowly to 5.2% resulting in greater & greater savings over loan B.

Generally, the more spread between the rate and APR, the larger the fees and the longer the breakeven point (vs. lower fee, higher rate/APR loans). If you think you’ll be there over a decade, then shop by the lowest APR, if your time frame is < 5 years, shop for the best rate with the lowest fees. Either time frame carries risk, as planning to stay for the long haul may be interrupted by job loss, relocation, family crisis, etc., while expecting to move/refi within 5 years may not be possible due to credit issues, equity reduction, etc. As a general rule, I tend to want to pay as little upfront as possible. As for the foolishness of waiting for rates to drop further, if deflation worsens you could see rates substantially lower, thus making a no/low cost, fixed 30 year loan a good hedge, since you have the ability to refi down at anytime w/o losing the chunk of cash used for pts/fees but you're still locked into a good 30 yr. rate in case inflation spikes due to all the gov't intervention. Also, for refi's, a true no cost loan at a rate less then your current loan is "risk free", with the option to refinance at a lower rates in the future (should that occur) without any break-even analysis. One should crunch the numbers to verify what is best for their particular situation and determine how much risk (if any) they're willing to take on various scenarios.

[carlsbadworker]

[quote=asianautica]
I think I’ll side w/ HLS on this one. If you don’t have a few grand to buy down rates, then you’re probably extending a little too much to buy the house. If you are not sure of your job security, then you shouldn’t be buying a house. Point is, If you can’t afford to pay a few grand up front to get you a better rate, you should rethink the house you’re buying. It might be too much for you. Pay a few thousands up front will save you tens of thousands over the life of the loan.[/quote]

Just because you have money to spend it on paying a few grand up front doesn’t mean you should spend on it. I could probably pay 40% down or more to get the best rate HLS refers to, but it may not be the best option for me. With extra cash, there are unlimited options. I could buy another investment property when the time is right. I could invest in my favorite company (or even start up my own company) when the time is right. It really depends on how much difference the mortgage rates are (typically they are small differences) and what your alternative options are. You might think that you saved tens of thousands over the life of the loan but your opportunity costs might be even higher.

[carlsbadworker]

[quote=asianautica]
I think I’ll side w/ HLS on this one. If you don’t have a few grand to buy down rates, then you’re probably extending a little too much to buy the house. If you are not sure of your job security, then you shouldn’t be buying a house. Point is, If you can’t afford to pay a few grand up front to get you a better rate, you should rethink the house you’re buying. It might be too much for you. Pay a few thousands up front will save you tens of thousands over the life of the loan.[/quote]

Just because you have money to spend it on paying a few grand up front doesn’t mean you should spend on it. I could probably pay 40% down or more to get the best rate HLS refers to, but it may not be the best option for me. With extra cash, there are unlimited options. I could buy another investment property when the time is right. I could invest in my favorite company (or even start up my own company) when the time is right. It really depends on how much difference the mortgage rates are (typically they are small differences) and what your alternative options are. You might think that you saved tens of thousands over the life of the loan but your opportunity costs might be even higher.

[carlsbadworker]

[quote=asianautica]
I think I’ll side w/ HLS on this one. If you don’t have a few grand to buy down rates, then you’re probably extending a little too much to buy the house. If you are not sure of your job security, then you shouldn’t be buying a house. Point is, If you can’t afford to pay a few grand up front to get you a better rate, you should rethink the house you’re buying. It might be too much for you. Pay a few thousands up front will save you tens of thousands over the life of the loan.[/quote]

Just because you have money to spend it on paying a few grand up front doesn’t mean you should spend on it. I could probably pay 40% down or more to get the best rate HLS refers to, but it may not be the best option for me. With extra cash, there are unlimited options. I could buy another investment property when the time is right. I could invest in my favorite company (or even start up my own company) when the time is right. It really depends on how much difference the mortgage rates are (typically they are small differences) and what your alternative options are. You might think that you saved tens of thousands over the life of the loan but your opportunity costs might be even higher.

[carlsbadworker]

[quote=asianautica]
I think I’ll side w/ HLS on this one. If you don’t have a few grand to buy down rates, then you’re probably extending a little too much to buy the house. If you are not sure of your job security, then you shouldn’t be buying a house. Point is, If you can’t afford to pay a few grand up front to get you a better rate, you should rethink the house you’re buying. It might be too much for you. Pay a few thousands up front will save you tens of thousands over the life of the loan.[/quote]

Just because you have money to spend it on paying a few grand up front doesn’t mean you should spend on it. I could probably pay 40% down or more to get the best rate HLS refers to, but it may not be the best option for me. With extra cash, there are unlimited options. I could buy another investment property when the time is right. I could invest in my favorite company (or even start up my own company) when the time is right. It really depends on how much difference the mortgage rates are (typically they are small differences) and what your alternative options are. You might think that you saved tens of thousands over the life of the loan but your opportunity costs might be even higher.

[Author]

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