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April 17, 2012 at 8:33 AM in reply to: On a refinance with closing costs, would you just add it to your loan balance or not? #741788April 16, 2012 at 9:49 PM in reply to: On a refinance with closing costs, would you just add it to your loan balance or not? #741770
HLS
Participant[quote=flu]
Does have a 30 year with a lower monthly increase my chances of qualifying for a second loan on say a rental, or no difference? [/quote]YES! Still out here…
The obligation of a higher 15yr payment will be factored in to your debt ratio rather than a 30yr payment (which is lower)
In effect, that will affect your ‘chances’ of qualifying by raising your debt ratio.
Depending on your other debts & income, it may not be an issue, it depends on your back end ratio.You may or may not be able to use projected rental income to qualify.
Although converting a primary home to a rental has not been the worst thing for many people in the past, in many cases it is a very poor financial decision to do this, esp if you have a lot of equity.
The emotional attachment is irrational.
***********
Your cost of less than 1% to save .50% on your rate will be recovered in about 20 months.
If you add it to your balance, you can pay down your principal at anytime. You are financing the $3K cost at less than 3% which may be tax deductible for you.Regardless of anything else, do you mind paying less than 3% to borrow money for 15yrs ?
Participant[quote=Former SD resident] we don’t really want to pay anything out of pocket and only plan to stay in our current home for a few more years.[/quote]
1. What is your current rate and balance ?
2. If you are certain that you will only stay for a few more years,(Less than 6) then also check on a 5yr ARM. The rate will be lower.Paying out of pocket is not the worst thing if it saves you enough in interest. You are going to pay one way or the other, but if you have the equity, you can add the cost to your loan balance without any out of pocket expense.
You are not likely to get much credit on a 5yr ARM, but will get a lower rate.
The credit is much larger on a 30yr fixed, but the rate will be higher.Depending on your current rate/balance/situation, you may be able to save a substantial amount with a 5yr ARM, even with a cost.
You will pay a premium to fix the rate for 30yrs, which you may not need. Another option is a 7yr ARM if you want another 2yrs of security.
ParticipantYES, they definitely exist and are available from almost any lender.
Every rate comes with a cost (or credit) associated with that rate. The cost/credit changes daily depending on the bond market, and there are often intra-day changes.
There is no set formula for how the credit increases for each higher 1/8th of a point, but it is not uncommon to receive a 1pt credit (of the loan amount) for taking a rate 1/8th of a pt higher.
IN THIS EXAMPLE: On a $400,000 loan you would receive a credit of $4000.00 (1.00%) and have a payment that is $29 higher each month.($348 yr)
If you keep the loan long enough, it will cost you
much more than $4000.After all fees are paid for, the excess funds can (usually) ONLY be used to cover certain things such as interest, insurance, property taxes and reserves required for an impound account. This can be a problem for those with low property taxes who do not want an impound account.
Some lenders *might* allow any excess to reduce principal balance but it is rare.
ParticipantIMHO the WORST property anybody can buy is a condo for a rental.
(In a casino they call this a sucker’s bet)Buying in a complex with litigation is just rolling the dice. Do you feel lucky ?
April 16, 2012 at 10:49 AM in reply to: On a refinance with closing costs, would you just add it to your loan balance or not? #741738Participant[quote=UCGal]
But I’m weird. I abhor debt. I would not take any step to increase my debt. I’m working on paying off my mortgage in full. [/quote]Hiya,, we’ve had the conversation before. It’s not that you are weird, you are practical.
There is NOTHING WRONG with manageable debt.
You are so focused on ‘not having a mortgage’ that nothing else makes sense to you.If you had a T-BILL/CD that was paying 6%+ and your mortgage was 4%, it just doesn’t make sense to not carry the mortgage. (Obviously not an option at the moment)
You either have cash to service debt OR you have no debt (and less cash) But don’t fool yourself, it comes at a cost.
Money is just a product. If I can earn more with it than it costs me to get it, then I want to be in ‘debt’ until the day that I die.
April 16, 2012 at 10:38 AM in reply to: On a refinance with closing costs, would you just add it to your loan balance or not? #741735ParticipantFLU..
You said that ‘total loan balance is 506,480″
Do you mean total payments over life of loan ?Having a 15yr payment obligation may affect your ability to qualify for future loans (vs.a 30yr payment)
Many people have caused themselves hardship by getting 15yr loans in the past.15yr payments vs 30yr payments are about ~50% more.
It doesn’t always make sense though.** In the BIG PICTURE the value of time/money is not factored into the savings.
Saving $100 a month/$1200 yr/$18,000 over 15yrs
is not the same as paying the $100 more towards
your principal balance every month.**THE TRUE SAVINGS of any refi is to pay the same payment that you are making now but at a lower interest rate, your compounded savings will be much greater, If you can afford it.
ParticipantSeller usually pays for OWNER’S policy.
They would probably need to pay extra at time of origination for a ‘binder’ that would allow the owner’s policy to be transferred with a covered time period. Why would they want to do this ??If you plan on selling a home within a couple of years, you would want this binder as it will save you money (when YOU sell), but because the seller usually pays for the policy, buyer’s don’t get the binder. (A buyer could offer to pay for the binder)
I don’t think that it is automatically included with a CLTA policy.
**Just another little loophole that very few people are aware of.
Participant[quote=bearishgurl]if you have purchased that same property or refied it in the last 3 years (is this still correct, HLS?), I believe you will qualify for a “short-term rate” on your ALTA title policy. This is a discount off the regular rate as they will search for liens against you or the property which were filed in the last three years only. [/quote]
There are all inclusive bundled rates available for refi transactions today that include a lender’s policy. They offer no discount due to age of policy. Seems like consumer is getting screwed.
Using an independent escrow company can cost more than using the escrow arm of a title company.
The liability is potentially huge on either policy, but very rarely does anyone ever have a claim.
Title insurance companies should be cleaning up today with all the refi activity.Collecting $600 for a policy that is valid for 30years is one thing, but they collect the same premium for a policy that may only be in effect for a few months.
There is still much confusion about who actually owns properties in certain states. A major problem could cause financial hardship for a title insurance company.
April 16, 2012 at 9:58 AM in reply to: On a refinance with closing costs, would you just add it to your loan balance or not? #741728Participant[quote=AN] then I’d roll the cost into the loan as well. But I’m also in the camp that say we’ll see inflation and the $ will be worth less 10-15 years from now than today. So, no reason on to roll it in.[/quote]
If you believe inflation will occur sooner rather than later, you should want as much debt as you can handle that will be paid back in future cheaper dollars.
If CD rates go back to 5%-8% or higher, it will have been foolish to have accelerated payments to pay off a 3%-4% mortgage.
The unknown is ‘when’It’s also a matter of responsibility and having something better to do with the cash.
Never underestimate the importance of liquidity/cash.There’s a big difference between being broke and having debt & having cash earning higher rates
of interest and having debt.April 16, 2012 at 9:48 AM in reply to: On a refinance with closing costs, would you just add it to your loan balance or not? #741723ParticipantComparing the payment savings is not the correct way to decide on the benefit of ANY refi, but it’s what most people do.
Did you get their quote for 3.00% ?
It may not make sense to take the lower rate with a cost. The recovery period could easily be 7-10 years.In the long you will always save more money at the lower interest rate.
ParticipantThere are 2 different types of title insurance policies.
When you buy a property you receive an OWNER’S title insurance policy that gives you clear title to the property forever. (Typically paid for by the seller, but always negotiable)
When you get a loan,either at time of purchase OR when you refi, you are providing the lender with a LENDER’S title insurance policy. Lender needs to have clear title.
August 28, 2010 at 10:22 PM in reply to: Can someone explain this mortgage deal too me? (deaf and dumb me that is:) #597095ParticipantIn general, banks dont “borrow short term and lend long term”
it’s a recipe for disaster. Banks have 5 yr CD’s but not 15/30yr CD’s. They may have a dept that hedges 30yr bonds, but why should they take the risk of a default IF they can sell it off to Fannie/Freddie and put the taxpayer at risk. Davej is probably better qualified to explain the backend.BofA has warehouse lines but perhaps they buy 15/30yr MBS as well. Who in their right mind wants to loan money for 15yrs below 4% (or for 30yrs slightly higher) it’s artificial govt stimulus.
If/when rates go up the cash value of bonds being held drops. The risk to any bondholder. Hopefully you get your rate if held to maturity otherwise you need to take a loss of principal to liquidate.
Insurance companies, pension funds may have to settle for these returns, the Fed is squeezing hard. Retired seniors who rely on interest income are suffering terribly.
APR is a terrible way to shop, diff people figure the APR differently.
Govt intervention HAS made things worse, not better. Reagan said it best, the govt is the problem, not the solution.
I’m the one that said foreclosure is the solution, not the problem. 😉 HLS
August 28, 2010 at 10:22 PM in reply to: Can someone explain this mortgage deal too me? (deaf and dumb me that is:) #597189ParticipantIn general, banks dont “borrow short term and lend long term”
it’s a recipe for disaster. Banks have 5 yr CD’s but not 15/30yr CD’s. They may have a dept that hedges 30yr bonds, but why should they take the risk of a default IF they can sell it off to Fannie/Freddie and put the taxpayer at risk. Davej is probably better qualified to explain the backend.BofA has warehouse lines but perhaps they buy 15/30yr MBS as well. Who in their right mind wants to loan money for 15yrs below 4% (or for 30yrs slightly higher) it’s artificial govt stimulus.
If/when rates go up the cash value of bonds being held drops. The risk to any bondholder. Hopefully you get your rate if held to maturity otherwise you need to take a loss of principal to liquidate.
Insurance companies, pension funds may have to settle for these returns, the Fed is squeezing hard. Retired seniors who rely on interest income are suffering terribly.
APR is a terrible way to shop, diff people figure the APR differently.
Govt intervention HAS made things worse, not better. Reagan said it best, the govt is the problem, not the solution.
I’m the one that said foreclosure is the solution, not the problem. 😉 HLS
August 28, 2010 at 10:22 PM in reply to: Can someone explain this mortgage deal too me? (deaf and dumb me that is:) #597843ParticipantIn general, banks dont “borrow short term and lend long term”
it’s a recipe for disaster. Banks have 5 yr CD’s but not 15/30yr CD’s. They may have a dept that hedges 30yr bonds, but why should they take the risk of a default IF they can sell it off to Fannie/Freddie and put the taxpayer at risk. Davej is probably better qualified to explain the backend.BofA has warehouse lines but perhaps they buy 15/30yr MBS as well. Who in their right mind wants to loan money for 15yrs below 4% (or for 30yrs slightly higher) it’s artificial govt stimulus.
If/when rates go up the cash value of bonds being held drops. The risk to any bondholder. Hopefully you get your rate if held to maturity otherwise you need to take a loss of principal to liquidate.
Insurance companies, pension funds may have to settle for these returns, the Fed is squeezing hard. Retired seniors who rely on interest income are suffering terribly.
APR is a terrible way to shop, diff people figure the APR differently.
Govt intervention HAS made things worse, not better. Reagan said it best, the govt is the problem, not the solution.
I’m the one that said foreclosure is the solution, not the problem. 😉 HLS
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