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July 8, 2013 at 10:42 AM in reply to: how much equity can I take out in a home equity loan (not HELOC)? #763377
HLS
ParticipantYou already have a 2nd!
While there are basic rules/guidelines for 1st mortgages (FNMA, VA,FHA etc) because the loans are either bought, guaranteed or insured, there are no set rules for 2nds or HELOCS.
20 different institutions could all have different rules.
Regardless of the fact that you do not have a penny drawn on your ($70,000) HELOC,
I am sure that there is a 2nd trust deed for $70,000 recorded. A HELOC is a 2nd when you have a 1st.
I don’t think that ANY institution is going to give you a ‘3rd’ TD at any rate.
You will even have a hard time finding a hard money lender to loan you any money, even at 12%-16% rates.
Add to the fact that you have no current income, you are in the unfortunate situation of having a bunch of equity that you cannot get to.Nobody ever seems to expect it to happen, but this is why I explain to people that a low payment obligation with the option to pay extra at any anytime is a safety cushion vs. wanting a 15yr loan to pay off sooner.
Being in a rush to pay off a mortgage by obligating to a higher payment is not the right choice for many people but they make it foolishly.I realize that this may not be the case for you, but I am seeing a lot of people with trapped equity and no way to get to it.
ParticipantCongrats!
It’s a good feeling. Rates are definitely higher now than they were 2 months ago.
I don’t expect them to go back to those lows, perhaps somewhere in between.The REAL benefit to a refi is to continue to make the same payment that you were previously making on your last loan. The compounded savings is huge and you can shave years off your new loan term.
It is definitely worth refinancing to save .25% at no cost.
The mistake that most people make (including mortgage ‘professionals’) is that they ONLY talk about the monthly savings. *A lower payment amount does not always mean it’s a better loan!!*ParticipantIt is often the parties involved that can determine how long closings take, and the relationship with escrow, title, lender etc.
In the big picture, although it’s usually the largest purchase in someone’s life, it’s just another file to everyone else involved.
An underwriter or escrow officer isn’t going to rush a file because the buyer agreed to a fast closing.Having agents or loan officers that are proactive and anticipate problems and deal with them promptly is what makes the difference.
Letting things sit around for 3-5 days each time and not following up creates delays and causes stress.
An agent encouraging a buyer (who needs a loan)to write an offer and close in 21 days and rushing to lift contingencies is irresponsible IMO.
Dealing with a lender who isn’t on top of conditions can also be full of headaches.
There are often going to be problems and delays but many times they can be minimized or avoided.
This becomes the difference in who you chose to deal with.Participant[quote=jimmy1977]
We saw a couple of deals with this clause that beat us out earlier in the year. Our agent told us this might be a good distinguishing point in our bid.Hence we put in the 21 day closing. Jimmy[/quote]
WOW. Not something that I would ever tell anyone to do.
Way too stressful and unrealistic. It can even be difficult for an all cash buyer to close in 21 days.
Most components of the process are totally out of your control.
In the future,I would not suggest anything shorter than 30 days for both loan lock & closing, although it may be possible to close sooner.Never agree to anything that you don’t understand 100% and don’t hesitate to get a 2nd opinion before you agree to something that you aren’t sure about.
Aggravation can often be avoided.ParticipantYou are welcome.
You may be able to get a HELOC at prime without an added margin from a different institution. (Currently 3.25%) perhaps less than prime.HELOCS are EXTREMELY profitable for them as their current cost of money is 1% or less.
I don’t know if anyone is doing prime minus anymore.No closing costs and an early termination fee are standard, but can vary, as well as the total % that they will loan to. 75%-80% inclusive of your 1st is probably max these days.
It truly is ‘their money, their rules’ vs. a 30yr Fannie Mae mortgage where almost everybody has the same rules/guidelines for an approval.
If it’s worth it to you, I would call every institution that I could find.
A small local/community bank might be having a special or promotion (such as a lower rate if you have auto withdrawal OR open an account with them)
Because HELOCS are at an adjustable rate, there is ZERO interest rate market risk to the lender (although they still face the risk of depreciation of the property)
Report back with your findings! I will be surprised if BofA has the lowest margin. ,,,HLS
ParticipantJimmy,
On whose advice did you agree to a 21 day closing when you still needed to navigate the loan process ?Participant[quote=bearishgurl]
Are some buyers today incurring too much debt for their families to realistically handle going forward? I would guess that many (most?) mortgage lenders don’t use MR and HOA monthly expense (BOTH can be exorbitant) when calculating monthly PITI in front end/back end ratios for qualification purposes.
Any mortgage brokers here, please feel free to correct me on this.[/quote]Debt ratios are factored using ALL minimum monthly payments on a credit report + proposed mortgage payment INCLUDING principal, interest, taxes, insurance, HOA, (AND Mello Roos, which is normally included in the property taxes)
In general, the guidelines do not care how many dollars you owe, they only care about the minimum monthly payments that show on a credit report.
**MAJOR hassles can occur to this formula when:
a)There is an open large HELOC (on a refi) that has nothing drawn against it.
b) Large car payment that only has a few months left to pay
c)Student loans that are deferred
d)Debt that was co-signed for even though borrower does not make the paymentParticipantI don’t think that you are being told the facts.
This doesn’t make sense.
If it is not a foreclosure, and the seller doesn’t have a crazy loan, then the seller doesn’t have a ‘bank’.
They have a LOAN SERVICER, (which may happen to be a bank)
I have NEVER heard of a loan servicer that will not provide a payoff statement.ParticipantIf you want to shop, then SHOP.
HELOCS come with different rules from each institution. Their money, their rules.
Call every bank/credit union and ask what their pricing is.
It may depend on credit score, amount of line and equity position.Be clear on closing costs. Some will offer no closing costs, but an annual fee. Some have an early termination fee if you close the line of credit in the first 3 to 5 years.
Is there a ‘floor rate’?Understand that they will record a 2nd lien against your property for the maximum amount of the line, whether you use it or not.
Be clear on the repayment terms. It may be interest only for the 1st 10 years and then a mandatory principal & interest payment on a 10 year amortization after that.
A $200K HELOC line is a $200K 2nd lien against your property.
Know that having a HELOC recorded against your property WILL complicate any future refi that you attempt, even if you have not drawn $1 on the line.
(Not impossible, but complicate)Depending on your needs, current rate, equity situation AND ability to qualify,
a cash out refi may be another/better option for you.
HELOC rates are ALWAYS adjustable and will probably only go up from here.The rate that you quoted above is not much lower than a 30yr fixed rate. Is it worth the risk TO YOU ?
Best HELOC I ever saw was a few years back at prime minus 1.50 with no floor.
That HELOC is currently @ 1.75% but they no longer offer it.
In general, rates at BofA are often terrible.ParticipantNothing unusual about wanting a walk thru prior to closing.
Closings/settlement are handled differently in the western US.Escrow companies are normally used in the western half of the US. A escrow & title company (instead of a lawyer) holds the money, signed deed, and handles the transfer and recording with the county.
It makes it easier for the seller to release ownership of the property, and the buyer submits funds to escrow, neither party needs to be present or ever meet. Escrow is a neutral third party that needs signed instructions from both sides.
They are highly regulated
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In the middle & Eastern US, closings are also called ‘settlement’… They are arranged on a specific date & specific time and buyer & seller meet along with an attorney as ‘settlement agent’, a title company rep may attend also.The settlement agent accounts for all funds listed on the settlement/closing statement and the property exchange takes place, and the deed is then recorded with the county.
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Same end result. I think it is better to deal with an escrow company but the option may not be available in many areas.May 6, 2013 at 12:07 PM in reply to: Why it no longer makes sense for young people to pay off their mortgage early #761815ParticipantYou seemed to have missed the point completely AND do not understand that ‘banks’ usually do not lend their money for 30 years.
(That’s called lending long and borrowing short which is potential suicide)
It’s not going to happen at the same time.Most 30yr mortgages are sold into 30yr bonds (MBS)
banks service loans they DO NOT own them.Everybody who qualifies today can tie up money for 30yrs in 3% range and it is very possible (and likely) that CD rates will be considerably higher at some point, (obviously not today)in the future.
Having accelerated payments on low interest rate debt may prove to have been very foolish.
Banks are not in business to lose money. The fractional reserve banking system and the creation of money is simple yet complex.
The entire economic system is a Ponzi scheme that plods along until something goes wrong and then there is a scramble to put a band aid on the problem.
If mortgage rates were much higher it makes more sense to me to eliminate debt as CD rates are likely to decline.
When rates are low, it is more likely that CD/Bond rates will rise, although not a guarantee.The system has never been as fragile as it currently is, regardless of what the ‘experts’ and govt are saying.
May 6, 2013 at 10:45 AM in reply to: Why it no longer makes sense for young people to pay off their mortgage early #761812ParticipantThe lenders who lend based on ‘projected’ income stream usually do not lend fixed for 30yrs AND rates are considerably higher than ‘real’ 30yr fixed rates today. What are the rates & term ?
When it’s adjustable or short term the risk is on the borrower.5% vs 3.50% is 43% higher which is a HUGE margin.
With $200K of debt, you have to give up $200K of cash to pay it off.This is not a simple matter of right/wrong but what an individual is comfortable with. There is always some risk involved.
Having no mortgage comes at a cost. The lost opportunity of that cash. It’s foolish to think otherwise.
I have seen too many older people who have lots of equity but very little cash. They are NOT enjoying their lives. Reverse mortgages are expensive.
There is nothing wrong with manageable debt.
I have had responsible people tell me that they sleep much better with money in the bank than they did when they had a high mortgage payment and no cash cushion.Having cash gives you options. Having lots of equity limits your options. The system makes me sick. It’s broken & manipulated.
It’s ridiculous/idiotic that people with $1 million dollar homes cannot qualify for $200K GSE loans at 3.50%Obviously not available today, but what if CD rates were 6%+ and the interest stream paid the full payment on an amortized mortgage ?
May 5, 2013 at 7:56 AM in reply to: Why it no longer makes sense for young people to pay off their mortgage early #761795Participant[quote=matt] I am thinking about paying this off to #1 assure my family a roof over our heads should we ever need it, #2 call me conservative but a guranteed 4.75% for me is a decent return. [/quote]
Nothing wrong with being conservative. Don’t ever let anybody talk you into taking risks that you aren’t comfortable with.
Due to your circumstances, just realize that equity in your home is trapped if you cannot qualify to refi.
Weigh giving up cash vs. having a huge cash cushion. Paying off debt comes at a cost.Many seniors are house rich but cash poor.
Even with a $1 million dollar home owned outright they may not qualify for a $200K loan. The system is broken.
They may have the option of a reverse mortgage to be able to get some cash, but I am not a huge fan of this loan. It’s another govt creation.*I may be able to help you with a refi if you’d like to contact me privately. Your situation is unusual and I need more details.
May 4, 2013 at 12:09 PM in reply to: Why it no longer makes sense for young people to pay off their mortgage early #761792Participant[quote=spdrun]that will loan on 1-4 unit investment property AS IF it were a 5+ unit or commercial property. You’ll pay 0.5% more for it, Rate fixed for 10 years, 20-25% down.[/quote]
I’m sure that this is possible but I question that it is only .5% more than 10yr fixed FNMA pricing.
There is a big difference on GSE loans on a rental between 20% and 25% equity.
There’s a risk factor with the rate only fixed for 10 yrs.They are DEFINITELY not selling that loan to GSE’s.
It’s their money, probably being kept as a portfolio loan and they can do whatever they want.(A fully amortized GSE 10yr loan on an investment property today is 2.75% with no points)
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