The 5/1 Interest Only ARM Returns

[(former)FormerSanDiegan]

[quote=jpinpb]Hold the phone, everyone. These are even uglier loans:

Remember those horrific option ARMs? Well they are now morphing into other products
Shocked yet? Well how about a 40 year IndyMac loan modification.
An example, Modified Unpaid Principal Balance 472,136. Maturity Date 6/1/46.

I guess we’ll be kicking the can until it’s time for the newborns of today to be old enough buy.[/quote]

Looked at the link … Now those are some stinker loans !! Why not just have an indefinite-term interest-only loan ?

[jpinpb]

[quote=FormerSanDiegan]
Looked at the link … Now those are some stinker loans !! Why not just have an indefinite-term interest-only loan ?[/quote]

Why not just rent from the banks in perpetuity and be done w/it.

Home ownership. HA!

[jpinpb]

[quote=FormerSanDiegan]
Looked at the link … Now those are some stinker loans !! Why not just have an indefinite-term interest-only loan ?[/quote]

Why not just rent from the banks in perpetuity and be done w/it.

Home ownership. HA!

[jpinpb]

[quote=FormerSanDiegan]
Looked at the link … Now those are some stinker loans !! Why not just have an indefinite-term interest-only loan ?[/quote]

Why not just rent from the banks in perpetuity and be done w/it.

Home ownership. HA!

[jpinpb]

[quote=FormerSanDiegan]
Looked at the link … Now those are some stinker loans !! Why not just have an indefinite-term interest-only loan ?[/quote]

Why not just rent from the banks in perpetuity and be done w/it.

Home ownership. HA!

[jpinpb]

[quote=FormerSanDiegan]
Looked at the link … Now those are some stinker loans !! Why not just have an indefinite-term interest-only loan ?[/quote]

Why not just rent from the banks in perpetuity and be done w/it.

Home ownership. HA!

[patb]

[quote=FormerSanDiegan][quote=patb][quote=FormerSanDiegan]That’s why I suggest they might not fund these unless the LTV of 75% or better, likely 70%.
That way the lender has at least some additional protection against a declining market.

Seems to me to be a reasonable risk at today’s price levels.[/quote]

this product is just expensive rent with a nasty termination fee.[/quote]

This is true for those of us without the funds to completely pay off the loan at any time.

However, for those who can, it is a cheap source of capital.[/quote]

so then pay it off

[patb]

[quote=FormerSanDiegan][quote=patb][quote=FormerSanDiegan]That’s why I suggest they might not fund these unless the LTV of 75% or better, likely 70%.
That way the lender has at least some additional protection against a declining market.

Seems to me to be a reasonable risk at today’s price levels.[/quote]

this product is just expensive rent with a nasty termination fee.[/quote]

This is true for those of us without the funds to completely pay off the loan at any time.

However, for those who can, it is a cheap source of capital.[/quote]

so then pay it off

[patb]

[quote=FormerSanDiegan][quote=patb][quote=FormerSanDiegan]That’s why I suggest they might not fund these unless the LTV of 75% or better, likely 70%.
That way the lender has at least some additional protection against a declining market.

Seems to me to be a reasonable risk at today’s price levels.[/quote]

this product is just expensive rent with a nasty termination fee.[/quote]

This is true for those of us without the funds to completely pay off the loan at any time.

However, for those who can, it is a cheap source of capital.[/quote]

so then pay it off

[patb]

[quote=FormerSanDiegan][quote=patb][quote=FormerSanDiegan]That’s why I suggest they might not fund these unless the LTV of 75% or better, likely 70%.
That way the lender has at least some additional protection against a declining market.

Seems to me to be a reasonable risk at today’s price levels.[/quote]

this product is just expensive rent with a nasty termination fee.[/quote]

This is true for those of us without the funds to completely pay off the loan at any time.

However, for those who can, it is a cheap source of capital.[/quote]

so then pay it off

[patb]

[quote=FormerSanDiegan][quote=patb][quote=FormerSanDiegan]That’s why I suggest they might not fund these unless the LTV of 75% or better, likely 70%.
That way the lender has at least some additional protection against a declining market.

Seems to me to be a reasonable risk at today’s price levels.[/quote]

this product is just expensive rent with a nasty termination fee.[/quote]

This is true for those of us without the funds to completely pay off the loan at any time.

However, for those who can, it is a cheap source of capital.[/quote]

so then pay it off

[(former)FormerSanDiegan]

[quote=patb]

so then pay it off[/quote]

The point is it’s a cheap source of capital.

One could use their money to generate a better rate of return than the rate on the note, which is likely in the 5% range (e.g. use to grow their business, exercise and sell their in-the-money stock options, buy REOs for cash, etc).

If the rate jumps in the future, then it might make sense to reduce or eliminate the debt, versus these other purposes.

The cost of capital is in the 5-6% range for corporations. For small companies/sole proprietors, I doubt one could access this much capital at anywhere near these rates.

[(former)FormerSanDiegan]

[quote=patb]

so then pay it off[/quote]

The point is it’s a cheap source of capital.

One could use their money to generate a better rate of return than the rate on the note, which is likely in the 5% range (e.g. use to grow their business, exercise and sell their in-the-money stock options, buy REOs for cash, etc).

If the rate jumps in the future, then it might make sense to reduce or eliminate the debt, versus these other purposes.

The cost of capital is in the 5-6% range for corporations. For small companies/sole proprietors, I doubt one could access this much capital at anywhere near these rates.

[(former)FormerSanDiegan]

[quote=patb]

so then pay it off[/quote]

The point is it’s a cheap source of capital.

One could use their money to generate a better rate of return than the rate on the note, which is likely in the 5% range (e.g. use to grow their business, exercise and sell their in-the-money stock options, buy REOs for cash, etc).

If the rate jumps in the future, then it might make sense to reduce or eliminate the debt, versus these other purposes.

The cost of capital is in the 5-6% range for corporations. For small companies/sole proprietors, I doubt one could access this much capital at anywhere near these rates.

[(former)FormerSanDiegan]

[quote=patb]

so then pay it off[/quote]

The point is it’s a cheap source of capital.

One could use their money to generate a better rate of return than the rate on the note, which is likely in the 5% range (e.g. use to grow their business, exercise and sell their in-the-money stock options, buy REOs for cash, etc).

If the rate jumps in the future, then it might make sense to reduce or eliminate the debt, versus these other purposes.

The cost of capital is in the 5-6% range for corporations. For small companies/sole proprietors, I doubt one could access this much capital at anywhere near these rates.

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