- This topic has 22 replies, 8 voices, and was last updated 8 years, 3 months ago by
moneymaker.
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August 1, 2016 at 1:33 PM #800149August 1, 2016 at 6:39 PM #800152
ucodegen
Participant[quote=HLS]
Onky when you understand that someone with a net worth of $2m-$3m, 800 credit score, 6 figure liquid assets/cash in the bank, 5 figure monthly cash flow and very little monthly debt cannot qualify for a $200,000 loan on a $600,000+ house
YET
a salaried employee with 3% down payment (that was a gift)
negative net worth, a 680 credit score, and no other assets can qualify for a 97% purchase loan can you grasp what a humbling experience is.[/quote]
I don’t know if I would call it a humbling experience .. more like a Dr Seuss moment. Not quite Dorothy, but kind of like Alice in Wonderland.Some of the distortion is caused by politicians who think that the inability of certain people to own houses is based solely on not being able to get a mortgage.
August 1, 2016 at 6:41 PM #800151Participant[quote=HLS][quote=ucodegen]
One thing to also consider:- What is the penalty on the second?
- What is the interest rate on the second?
- How big is the second?
Generally (not always) a cash-out refi boosts the interest rate you are paying up 0.5%. Run the numbers with the cash out vs subordination and see which results in lower total costs.If the second has a significantly higher interest rate than the first and combining still keeps you out of PMI(if you currently are out of PMI) – it might actually benefit to combine and take the hit on the new first’s interest rate – you got to run the numbers for both to know. I don’t have enough info of your situation to do that.
NOTE: An increase in interest is not quite as bad as most people think. Remember that mortgage interest is tax deductible. To get the real ‘effective’ rate on your disposable income, use your marginal tax rate (amount that each additional $ of income increases your tax). So, if you are in the 30% total (fed and state) marginal tax bracket, real interest rate increase would be 0.005 * (1 – 0.30) = 0.0035, or 0.35%.[/quote]
I could not disagree with you more.
*****Your (mis)information is dangerous.
[/quote]Kind of a blanket statement. The one thing I emphasized most of all is to run the numbers both ways to make a decision. With tax software available at pretty reasonable costs, it is reasonable for people to use the tax software to see what the difference really will be. Just how is that dangerous?
[quote=HLS]
Cash out generally does NOT increase your rate .50%
[/quote]Someone had posted a worksheet showing how points get added to loans. I don’t remember which Bank it was from – I think remembering it as Countrywide – I don’t know if I still have it in my files (switch computers a few times since I first got it) – On a side note, I know someone applying for refinancing(friend, not me) and I asked this person to get a quote two ways (the person working the loan wanted to combine other unrelated loans into the first – which would tend to trigger a ‘cash out’) Person has good credit but way too much debt – refi first only was 3.75%Fixed for not combining, 4.35% for combining in the other loans. The person offering the loan did not really want to show numbers both ways – but I had a reason. To show the person(friend) that rolling the debt into the mortgage in not really a good idea if it can be avoided – though under certain circumstances you can come out ahead. The loan ‘person’ wanted roll in $30k of other debt into a $530k mortgage – and it triggers an increase in interest rate on ALL of it. You might save a little bit on the $30k, but you get hit on the $530k – for 30years. Though it would depend upon what rate the $30k was at.
[quote=HLS]
A subordination of a HELOC is almost always a far better choice.
Who is talking about PMI ?
[/quote]I mentioned it because if you combine the loans, you have to make sure that LTV does not trigger PMI if you currently don’t pay it.[quote=HLS]
Penalty to close HELOCS are usually $300, only in the first 3 years.
Interest rates on HELOCS is usually not more than prime rate
currently 3.50%
Most people who have HELOCS, have them for relatively low amounts.
[/quote] 3.5%? not the HELOCS I saw.. though it was for a high debt person – mileage may vary depending upon… [quote=HLS]
Increase in interest rate is WORSE than most people think.
Are you a CPA ?
You are still paying the interest. Who cares how much of it is
tax deductible. For every extra dollar you pay and save 30c, aren’t you still paying 70c ?
[/quote]Yes, exactly my point… as the formula I ran shows. Though if you can use that to get rid of a loan at a much higher rate, it might make sense. It depends. That is why you run the numbers both ways and use marginal tax rate to find out what the real change is instead of accepting the line that “well it is all tax deductible once you refi it into a mortgage”. Too often this is taken as the amount directly reduces the tax you pay 1 for one, which it doesn’t. The deduction is used to adjust the adjusted gross income before tax calculations – which is why marginal tax rate is used to get a more accurate number.[quote=HLS]When your rate goes up for cash out, you aren’t only paying the higher rate on the cash out portion, the higher rate is on the entire loan amount. .25% over 30 years is a lot of money.
[/quote]Exactly, which is what I stated. This is what I mentioned. The problem is that there is no mention of what the rate on the HELOC for the solar was, what the current rate of the first is, if they have a second and what its rate is, what is current LTV on the first, etc. That is why I mentioned “run the numbers both ways” because it depends. For example, if you can get a 10% loan down to 3.75% even if it increases the primary – it will depend upon how much of debt you are getting out of the 10% interest rate on the refi and how big is the primary. .. again mileage will vary, run the numbers both ways.
[quote=HLS]
Do you understand the standard deduction ?
For a couple with $12,600 standard deduction, the first $12,600 of Interest/Property taxes is a wash.
With current low interest rates and old property tax base, many couples (filing jointly) are better off with the standard deduction.
[/quote]
Yes, I know about std deduction. Not all people are better off with standard deductions (also depends upon income). It depends if there have been other refi(s) that rolled in other HELOCs in the past, or other types of debt (making the mortgage bigger than you think). I didn’t want to make those assumptions.
[quote=HLS]
Their mortgage interest is a complete waste of money as it’s NOT tax deductible when taking the standard deduction.In many parts of the country, interest + property taxes is nowhere near $12,600
[/quote]
Yes, but this is California… where a shack(upgraded) in the inland goes for almost $400k. I know of another situation – house $760k, tax assessed about $600k – financed about $500k. – rather common for Sorrento Valley, Poway, Carmel Valley, Carlsbad, some areas of Encinitas, University City.NOTE: State taxes are also deductible on the Fed tax form.
[quote=HLS]
2 huge myths that get repeated (Not only by ignorant Realtors):
a) Rent is throwing money away
b) You should buy a house to get the tax deduction
***************************************
a) No it’s not
b) You should get tax advice from a qualified tax adviser*Everyone’s situation is different; there are always exceptions.[/quote]
Never said rent is throwing money away. It is only if you change your spending habits to ‘burn’ the difference between your buy costs and your rent costs. And for b) you can get info from tax advisor – or you can game it by using tax software to run your taxes as if you had the mortgage and as if you were renting (yes, it is doing it twice, but you can learn a lot in the process – even more if you do it ‘long style’ on the actual forms, not using software)August 1, 2016 at 9:40 PM #800158moneymaker
ParticipantJust to shed a little light original loan 3.5%, HELOC was at 4.5%, then went up to 4.75% with the last rate hike,so will be rolling the 2 together at 2.625% (APR 2.699%), seems like a no brainer but did not know about $500 ETF until after starting process (I know it was disclosed originally, just didn’t really think i would be refi’ing again).Second is with the same lender as the first. I’m hoping I won’t be forced to close the second when I refi, although that was my intention to begin with.
August 1, 2016 at 10:39 PM #800159spdrun
ParticipantI don’t know about others, but as a landlord, I don’t like to rent to self employed people whose income i cannot easily verify.
I do. If their references/credit check out, they’re more likely to stay longer and pay on time, since they’ve probably had experience with narrow-minded a$$hat thinking as above. i.e. harder for them to find other options makes them a good tenant.
Grad (especially med) students and self-employed tend to make the best tenants.
Also, I like the idea of giving someone who’s operating outside the “system” where good, boring drones are “supposed” to operate a leg up. It’s my small version of a “F Yourself With a Cossack Dagger” to corepirate Dumbericantia.
August 15, 2016 at 11:48 PM #800651HLS
ParticipantHow’s your refi going ??
August 18, 2016 at 11:35 AM #800733Escoguy
ParticipantIt wasn’t my thread but my three loans recorded today:
1. (home I live in) was 431K 30yr fixed at 3.5% now 417K 30yr fixed at 3.1%, combined cash flow impact of $303/month
cost was about $33002. was 3.875% 328K 30 yr fixed (investment property), now 1.65% variable 30 year, cash flow impact $391/month
cost about $34003. was 3.75% 30 yr fixed, now 3.5% 30 yr fixed, $64/month cost about $3300, (also investment property)
in all, locked around July 6th, so 6 weeks, assuming I keep the properties next 15 years, cash flow impact is about 100K
Payback time about 15 months even factoring rates going up on one variable loan.
August 20, 2016 at 6:52 PM #800770ParticipantStill waiting on them to close. Just did a phone call the other day to explain that the Amex to Citi switch was not my idea, it was Costco’s. Anyway not sure if it is the 5th or 6th person I’m dealing with they even contract out there credit checking stuff which is weird but when I think about it makes sense in order to keep fraud to a minimum I suppose. Will update when I know more.
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