The House Trap

[4plexowner]

“why not a 10/20 ARM?”

I have a 10/20 fixed – the first 10 years are interest only – the last 20 are fully amortized – the interest rate is fixed for the entire 30 year period

This loan made sense to me – the first 10 years of a mortgage barely touch the principal anyway so why not pay interest only? – the difference in payments between a 20 and 30 year amortization schedule is minimal (a few hundred bucks per month) – the interest rate is fixed so there won’t be any surprises

don’t know if this loan product is still available today

[HLS]

4plex,,
I think that this loan is still available. I don’t recommend them. This is really a sucker’s loan. It’s ignorant to say that “the first 10 years of a mortgage barely touch the principal anyway so why not pay interest only”
It’s expensive money. Simple answer.

[HLS]

4plex,,
I think that this loan is still available. I don’t recommend them. This is really a sucker’s loan. It’s ignorant to say that “the first 10 years of a mortgage barely touch the principal anyway so why not pay interest only”
It’s expensive money. Simple answer.

[HLS]

4plex,,
I think that this loan is still available. I don’t recommend them. This is really a sucker’s loan. It’s ignorant to say that “the first 10 years of a mortgage barely touch the principal anyway so why not pay interest only”
It’s expensive money. Simple answer.

[HLS]

4plex,,
I think that this loan is still available. I don’t recommend them. This is really a sucker’s loan. It’s ignorant to say that “the first 10 years of a mortgage barely touch the principal anyway so why not pay interest only”
It’s expensive money. Simple answer.

[HLS]

4plex,,
I think that this loan is still available. I don’t recommend them. This is really a sucker’s loan. It’s ignorant to say that “the first 10 years of a mortgage barely touch the principal anyway so why not pay interest only”
It’s expensive money. Simple answer.

[4plexowner]

‘expensive money’ is relative – money isn’t expensive when it is invested and the return is greater than the interest rate on the mortgage
[img_assist|nid=11867|title=Gold Bull Market|desc=|link=node|align=left|width=400|height=244]

also, this mortgage is less than a third of my property value even in today’s depressed market – with the crazy runup in property values between 1998 and 2006 I wanted to take some of my real estate gains off the table without having a large monthly payment – the 10/20 loan met my needs and I’ll keep it as long as it makes sense – if interest rates go to 20% (remember the ’80’s?), I’ve got a fixed-rate loan for 30 years and now we are talking about CHEAP money!

different needs, different loan products

[4plexowner]

‘expensive money’ is relative – money isn’t expensive when it is invested and the return is greater than the interest rate on the mortgage
[img_assist|nid=11867|title=Gold Bull Market|desc=|link=node|align=left|width=400|height=244]

also, this mortgage is less than a third of my property value even in today’s depressed market – with the crazy runup in property values between 1998 and 2006 I wanted to take some of my real estate gains off the table without having a large monthly payment – the 10/20 loan met my needs and I’ll keep it as long as it makes sense – if interest rates go to 20% (remember the ’80’s?), I’ve got a fixed-rate loan for 30 years and now we are talking about CHEAP money!

different needs, different loan products

[4plexowner]

‘expensive money’ is relative – money isn’t expensive when it is invested and the return is greater than the interest rate on the mortgage
[img_assist|nid=11867|title=Gold Bull Market|desc=|link=node|align=left|width=400|height=244]

also, this mortgage is less than a third of my property value even in today’s depressed market – with the crazy runup in property values between 1998 and 2006 I wanted to take some of my real estate gains off the table without having a large monthly payment – the 10/20 loan met my needs and I’ll keep it as long as it makes sense – if interest rates go to 20% (remember the ’80’s?), I’ve got a fixed-rate loan for 30 years and now we are talking about CHEAP money!

different needs, different loan products

[4plexowner]

‘expensive money’ is relative – money isn’t expensive when it is invested and the return is greater than the interest rate on the mortgage
[img_assist|nid=11867|title=Gold Bull Market|desc=|link=node|align=left|width=400|height=244]

also, this mortgage is less than a third of my property value even in today’s depressed market – with the crazy runup in property values between 1998 and 2006 I wanted to take some of my real estate gains off the table without having a large monthly payment – the 10/20 loan met my needs and I’ll keep it as long as it makes sense – if interest rates go to 20% (remember the ’80’s?), I’ve got a fixed-rate loan for 30 years and now we are talking about CHEAP money!

different needs, different loan products

[4plexowner]

‘expensive money’ is relative – money isn’t expensive when it is invested and the return is greater than the interest rate on the mortgage
[img_assist|nid=11867|title=Gold Bull Market|desc=|link=node|align=left|width=400|height=244]

also, this mortgage is less than a third of my property value even in today’s depressed market – with the crazy runup in property values between 1998 and 2006 I wanted to take some of my real estate gains off the table without having a large monthly payment – the 10/20 loan met my needs and I’ll keep it as long as it makes sense – if interest rates go to 20% (remember the ’80’s?), I’ve got a fixed-rate loan for 30 years and now we are talking about CHEAP money!

different needs, different loan products

[LuckyInOC]

[quote=patb]Lucky

There are no secure aerospace jobs. it’s a terrible industry.[/quote]

Patb, I agree with you, the ‘general’ aerospace industry is not secure.

However, the products my company make cannot be relocated:
– Most management lives within minutes of the facility
– Key engineering personnel would not relocate
– Cost to move or buy capital test equipment
– Cost and delay to requalify all products in new facility
– Union shop

Our product is one manufacturer of two in the world. The other is foreign owned. It is impossible for a new company to start with out legacy product. We supply commercial and government products to several satelite companies. The only way to relocate this type of facility would be slowly moving mfg dept by mfg dept.

I am sure their are other companies, unions, or government jobs that have fixed increases at or above 3%. Let’s see… SDGE, DWP, MWD, SC Edision, PGE, Sempra Energy, State employees (who can’t be laid-off), UC teachers,

4plex, the 10/20 ARM may be exactly what he has. I will have to check. He did mentioned his rate increase is limited each year. This would make it even better.

I did find a 10/20 ARM for a $417k loan/ $500k value @ 4.625% with $400 in fees.
Payment = $1,739; Income = $70k @ 30% LTD
Initial Cap: 5%; Period Cap: 2%; Max Cap: 5%

In 10 yrs, the payment for the 20yr fixed for a $417k loan @ 9.625 with no fees.
Payment = $3921 maximum risk.
Delta = $2,182

A 30 yr fixed (for comparison only) @ $5.375% with $1234 in fees.
Payment = $2,335

I couldn’t make the numbers work for someone buying at max LTD ratios. The $70k income only came up to $93.4k per year at 3% annual increases. They would need to be at 9% annual increases or $201k to make up the difference. I am now under the belief 10/20 ARMs will work only as Patb indicated. The terms of my coworker appear to be better than is indicated above and may be the exception not the rule. If the interest rates stay low all the better.

For those that are saying in 10 years interest rates and inflation will be above 10%, you should be jumping at these deals and the banks (Government) will be taking it in the short again.

Lucky In OC

[LuckyInOC]

[quote=patb]Lucky

There are no secure aerospace jobs. it’s a terrible industry.[/quote]

Patb, I agree with you, the ‘general’ aerospace industry is not secure.

However, the products my company make cannot be relocated:
– Most management lives within minutes of the facility
– Key engineering personnel would not relocate
– Cost to move or buy capital test equipment
– Cost and delay to requalify all products in new facility
– Union shop

Our product is one manufacturer of two in the world. The other is foreign owned. It is impossible for a new company to start with out legacy product. We supply commercial and government products to several satelite companies. The only way to relocate this type of facility would be slowly moving mfg dept by mfg dept.

I am sure their are other companies, unions, or government jobs that have fixed increases at or above 3%. Let’s see… SDGE, DWP, MWD, SC Edision, PGE, Sempra Energy, State employees (who can’t be laid-off), UC teachers,

4plex, the 10/20 ARM may be exactly what he has. I will have to check. He did mentioned his rate increase is limited each year. This would make it even better.

I did find a 10/20 ARM for a $417k loan/ $500k value @ 4.625% with $400 in fees.
Payment = $1,739; Income = $70k @ 30% LTD
Initial Cap: 5%; Period Cap: 2%; Max Cap: 5%

In 10 yrs, the payment for the 20yr fixed for a $417k loan @ 9.625 with no fees.
Payment = $3921 maximum risk.
Delta = $2,182

A 30 yr fixed (for comparison only) @ $5.375% with $1234 in fees.
Payment = $2,335

I couldn’t make the numbers work for someone buying at max LTD ratios. The $70k income only came up to $93.4k per year at 3% annual increases. They would need to be at 9% annual increases or $201k to make up the difference. I am now under the belief 10/20 ARMs will work only as Patb indicated. The terms of my coworker appear to be better than is indicated above and may be the exception not the rule. If the interest rates stay low all the better.

For those that are saying in 10 years interest rates and inflation will be above 10%, you should be jumping at these deals and the banks (Government) will be taking it in the short again.

Lucky In OC

[LuckyInOC]

[quote=patb]Lucky

There are no secure aerospace jobs. it’s a terrible industry.[/quote]

Patb, I agree with you, the ‘general’ aerospace industry is not secure.

However, the products my company make cannot be relocated:
– Most management lives within minutes of the facility
– Key engineering personnel would not relocate
– Cost to move or buy capital test equipment
– Cost and delay to requalify all products in new facility
– Union shop

Our product is one manufacturer of two in the world. The other is foreign owned. It is impossible for a new company to start with out legacy product. We supply commercial and government products to several satelite companies. The only way to relocate this type of facility would be slowly moving mfg dept by mfg dept.

I am sure their are other companies, unions, or government jobs that have fixed increases at or above 3%. Let’s see… SDGE, DWP, MWD, SC Edision, PGE, Sempra Energy, State employees (who can’t be laid-off), UC teachers,

4plex, the 10/20 ARM may be exactly what he has. I will have to check. He did mentioned his rate increase is limited each year. This would make it even better.

I did find a 10/20 ARM for a $417k loan/ $500k value @ 4.625% with $400 in fees.
Payment = $1,739; Income = $70k @ 30% LTD
Initial Cap: 5%; Period Cap: 2%; Max Cap: 5%

In 10 yrs, the payment for the 20yr fixed for a $417k loan @ 9.625 with no fees.
Payment = $3921 maximum risk.
Delta = $2,182

A 30 yr fixed (for comparison only) @ $5.375% with $1234 in fees.
Payment = $2,335

I couldn’t make the numbers work for someone buying at max LTD ratios. The $70k income only came up to $93.4k per year at 3% annual increases. They would need to be at 9% annual increases or $201k to make up the difference. I am now under the belief 10/20 ARMs will work only as Patb indicated. The terms of my coworker appear to be better than is indicated above and may be the exception not the rule. If the interest rates stay low all the better.

For those that are saying in 10 years interest rates and inflation will be above 10%, you should be jumping at these deals and the banks (Government) will be taking it in the short again.

Lucky In OC

[LuckyInOC]

[quote=patb]Lucky

There are no secure aerospace jobs. it’s a terrible industry.[/quote]

Patb, I agree with you, the ‘general’ aerospace industry is not secure.

However, the products my company make cannot be relocated:
– Most management lives within minutes of the facility
– Key engineering personnel would not relocate
– Cost to move or buy capital test equipment
– Cost and delay to requalify all products in new facility
– Union shop

Our product is one manufacturer of two in the world. The other is foreign owned. It is impossible for a new company to start with out legacy product. We supply commercial and government products to several satelite companies. The only way to relocate this type of facility would be slowly moving mfg dept by mfg dept.

I am sure their are other companies, unions, or government jobs that have fixed increases at or above 3%. Let’s see… SDGE, DWP, MWD, SC Edision, PGE, Sempra Energy, State employees (who can’t be laid-off), UC teachers,

4plex, the 10/20 ARM may be exactly what he has. I will have to check. He did mentioned his rate increase is limited each year. This would make it even better.

I did find a 10/20 ARM for a $417k loan/ $500k value @ 4.625% with $400 in fees.
Payment = $1,739; Income = $70k @ 30% LTD
Initial Cap: 5%; Period Cap: 2%; Max Cap: 5%

In 10 yrs, the payment for the 20yr fixed for a $417k loan @ 9.625 with no fees.
Payment = $3921 maximum risk.
Delta = $2,182

A 30 yr fixed (for comparison only) @ $5.375% with $1234 in fees.
Payment = $2,335

I couldn’t make the numbers work for someone buying at max LTD ratios. The $70k income only came up to $93.4k per year at 3% annual increases. They would need to be at 9% annual increases or $201k to make up the difference. I am now under the belief 10/20 ARMs will work only as Patb indicated. The terms of my coworker appear to be better than is indicated above and may be the exception not the rule. If the interest rates stay low all the better.

For those that are saying in 10 years interest rates and inflation will be above 10%, you should be jumping at these deals and the banks (Government) will be taking it in the short again.

Lucky In OC

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