Short Corner
Footballguy
You take anywhere from 2-2.5 point hit on the RATE when you go from conforming to jumbo.
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Mortgage Rates (3 Viewers)
- Thread starter MechEng
- Start date
Chadstroma
Footballguy
I can not answer the first Q since I do not have current rates in front of me. Second part: Lot's of variables here. How long do you plan on staying at this property? How is your specific real estate market look? Are you paying the interest only or more? How is your cash flow, stressed or fine? What are your goals, what do you want to do, etc? How is your.... what I call 'sleep well at night' factor.... meaning or you worried about the 2.5 years in the future? What index is used on the adjustable? Any pre-payment penalties (sometimes first 3 years on these type of loans)?i don't know.chadstroma or proninja may know.i'm in residential real estate but not a mortgage broker.What kinds of rates are currently being quoted with these types of loans? I'm in a 5 yr I/O loan (fixed for 2.5 more years at 5.25%). Because the market has declined and is likely to continue to decline, would you recommend avoiding fixed P&I loans for the near future?i think he is talking about a product that is a 30 year fixed loan with the first 15 years as I/O and the next 15 years like a 15 year P&I loan. odds are you'll refi before you ever hit your 16th year so you get an I/O loan fixed for a long period of time.i like that product as well personally if you arne't comfortable with an option arm.Why is this?They will go down. I would do 15 year Interest only mortage, don't do 30 year.Good Luck
GTBilly
Footballguy
Forgive the stupid Canadian but you are all talking about locking in at 5.xx over 30 years, does that mean you get 5.xx for 30 years and never renew no interest rate changes no nothing just the same payment without hassle for the full term.
I only ask cause I have a 200000 mortgage at 5.25 over 25 but only good for five years. I would lock at 5.5 for the full term in a freaking heartbeat.
I only ask cause I have a 200000 mortgage at 5.25 over 25 but only good for five years. I would lock at 5.5 for the full term in a freaking heartbeat.
Chadstroma
Footballguy
True, and that will further lower your rate (cost savings) but may increase your monthly payment (cash flow) depending on all the variables.
redman
Footballguy
Correct.
RedRaiders
Mr. +EV
Thanks - good to know. That is a good number.
Punchie
Footballguy
Mortgage was roughly 200k, we paid 2k to go from a 5.325 to 5.125 and added it to the mortgage. The payoff for the point was 42 months so it was worth it to me.
Short Corner
Footballguy
As long as you ride out the 42 months you are fine. Any refi before then is like burning $2000. Literally.
greedygoat
Footballguy
Roll the closing costs into the new loan?
Short Corner
Footballguy
They will just tack it onto your mortgage balance or you could take about .250 rate hit and have no closing costs. I would do the latter.
I am going to start monitoring this just in case. I have 5.75% now on a 30 year (which I got with no points), but with closing costs, I wouldn't go for 5.375 or 5.5 yet.However, just to put things in perspective, I believe in my last house that I refinanced at the market bottom in 2003. I got a 30 year fixed at 4.875% with 0 points. If you look at any of the bankrate.com charts, you will see me smiling at the bottom point of that spike down that summer. Luckily, even though I sold my house 3 years later, the interest rate drop was still good enough that the break even point was 2 years, so I still saved enough that it was worth it.When I bought this house and rates were over 6%, I really missed that 4.875% loan.
If rates somehow hit under 5%, I think I would refinance again. Not sure if I would buy down or just go with the 0 closing costs, i.e. just lower the rate and not change the principal amount at all.
shadyridr
Footballguy
Like I said it was a dumb question. I figured that was the answer but I wanted to make sure. Im locked in at 6.25 and Ive been in my house for <2 yrs so I think refinancing might be a good idea.
Punchie
Footballguy
I rolled the costs into the loan, plus if you need cash you can take up to 2% or $2k cash back from the loan to help with other debt.
This all just depends on whether or not you see yourself potentially moving any time soon. If not, it probably is best to take the lower rate over the longer run. If you are worried about selling soon, then if the rate drop is enough, do the no closing costs and in essence your principal does not change, you need $0 to do the closing and your monthly payments just drop.
Punchie
Footballguy
I was in the same boat. 6.375% on a house we built 18 months ago. I'm coming out of this with $200 more a month in my pocket and $2k cash back to pay off some christmas debt.
redman
Footballguy
Do you have a prepayment penalty?
shadyridr
Footballguy
no
lumpy19
Footballguy
Moved into my house last march and I'm locked in at 6.375 right now, think i'm going to follow this path.Thanks FBG
CrossEyed
Footballguy
Just locked in last week on a 5.625 30 year fixed with zero points. Probably could have waited it out a little, but the last time I tried to do that the rates spiked and I ended up kicking myself. Saved $115/month, so I'm pretty happy. Also was with the same mortgage company, so it's been pretty quick and easy. We close next Friday.
shadyridr
Footballguy
:X Just emailed my mortgage guy to see what rates/costs they can offer me. Ive been happy with Chase and would rather not leave.
Topes
Footballguy
Well, there are too many unknowns for us here.You'll really need to figure it out yourself.You'll need to have a good handle on the closing costs for the refi. My only refinance cost $2201. I knew that was the ballpark when I decided to do it.I did a spreadsheet showing my current payments (principal/escrow/interest) and my new payments.I factored in different payment levels (extra principal per month).I looked at the various time frames for the $2201 to be paid off, and decided it was worth it to do it.(I paid one point to get my rate, which is why the refi cost is a little on the high side.)Refinanced my $62k mortgage balance in June 2003, from 5.625% to 4.875%. (7 year FRM, amortized over 30 years)Kept a spreadsheet showing where I was at with both new and old mortgages, presuming same payment amount each month.Broke even in July 2006.Refinance has saved me $742 to date.With a bigger mortgage and longer term, those numbers can add up. Like I said, I'm in a 7 year loan amortized on a 30 year schedule. So, I need to be paid in full by June 2010. The plain is to be paid off at the end of this year. $18k to go. Scraping pennies.
Here is a quick way to get a rough apples-to-apples estimate of the savings from refinancing: compute the principal and interest payment for the new and current interest rate, keeping the balance and term length the same in both computations.
Here's an example:
Open Excel or Google spreadsheet.
Now suppose I can refinance at 5.5% for a 30 year mortgage and suppose I'm already a few years into a 30 year mortgage at 6.25% and I have a current balance of 250000. Suppose it will cost me $2000 to refinance.
Enter the following function:
=PMT(0.0625/12,30*12,250000,0)
This results in a monthly principal and interest payment of $1,539.29/
Here 0.0625 corresponds to my current rate (6.25% per year). 360 corresponds to the length of the mortgage (30 years * 12 payments per year) in my potentially refinanced mortgage. 250000 corresponds to my current balance. This may not correspond to my actual principal and interest payment now because I want to use the same number of payments in both computations to make the comparision fair.
Next, enter the following:
=PMT(0.0550/12,30*12,250000,0)
Here 0.0550 corresponds to my current rate (5.50% per year).
This results in a monthly principal and interest payment of $1,419.47
The savings is $1,539.29-$1,419.47 = $119.82 per month. So, the breakeven point is roughly $2000/$119.82 = 17 months.
.
Here's an example:
Open Excel or Google spreadsheet.
Now suppose I can refinance at 5.5% for a 30 year mortgage and suppose I'm already a few years into a 30 year mortgage at 6.25% and I have a current balance of 250000. Suppose it will cost me $2000 to refinance.
Enter the following function:
=PMT(0.0625/12,30*12,250000,0)
This results in a monthly principal and interest payment of $1,539.29/
Here 0.0625 corresponds to my current rate (6.25% per year). 360 corresponds to the length of the mortgage (30 years * 12 payments per year) in my potentially refinanced mortgage. 250000 corresponds to my current balance. This may not correspond to my actual principal and interest payment now because I want to use the same number of payments in both computations to make the comparision fair.
Next, enter the following:
=PMT(0.0550/12,30*12,250000,0)
Here 0.0550 corresponds to my current rate (5.50% per year).
This results in a monthly principal and interest payment of $1,419.47
The savings is $1,539.29-$1,419.47 = $119.82 per month. So, the breakeven point is roughly $2000/$119.82 = 17 months.
.
TheWick
Footballguy
Chadstroma
Footballguy
That might not make sense depending on other variables such as the amount of the loan and how long you expect to have the loan.
This is also a good technique to compare different refinance options, eg it is worth it to pay points for a lower rate.
Short Corner
Footballguy
Of course there is no one answer for all scenarios. But IMO, in todays environment, it is the smart choice for the majority of borrowers out there. Especially if you anticipate the rates dropping further.
Chadstroma
Footballguy
That is the key. Best to talk through with it with someone who is knowledgable and can walk you through options for your own specific situation.
prefontaine
Footballguy
I wouldn't anticipate rates dropping much from here. Mortgage rates don't necessarily follow the fed funds rate. If you haven't been paying attention, the banks are getting destroyed on losses and we are likely already in or about to be in a recession. Inflation is a widespread concern. Rates may drop further but I'd be pretty surprised if the bottom for mtg rates is much lower than 10bps from here.
Chadstroma
Footballguy
Common misunderstanding with the fed and rates. It is not a direct cause and affect relationship. If you have equity loans or lines of credit those are almost always tied into the Prime Rate as an index and that follow the fed in lock step. Mortgage rates are tied into bond rates and those do not always follow the fed because there are many other factors involved in what happens to those rates. I pretty much agree with Pre here, except I would give it a slightly bigger bottom of about 15 bps.
videoguy505
Footballguy
Linus Scrimmage
Footballguy
The housing market is not at it's bottom point and neither is the economy. We're not even in a "recession" yet. When all that happens, the rates will be at their best.
GTBilly
Footballguy
Bumping myself cause I actually wanna know.
Yes, the interest rate is fixed for the entire term.
GTBilly
Footballguy
Comparably up here where I have to renew I would jump at a 25 year lock of 5.5.
Sand
Footballguy
How do you know? Recessions usually get called after they are over.Mortgage rates are based on expectation, not current actual rates.
Linus Scrimmage
Footballguy
No one knows, it's all speculation. If I'm wrong it'll cost me, but 2 years ago when people were telling me to buy now. I was smart to wait. The moment it goes up, is probably the time to buy. I think that's at least a year or more away.
prefontaine
Footballguy
Recession is debatable. We won't know that for a bit. Sentence three is a false conclusion. Even if you are right about one and two, these are not the factors that lead to the lowest rates. For instance in 2005, the housing market was booming and the economy was fine. Lowest rates in forever.
prefontaine
Footballguy
That's a question of buying. That's not what we're discussing. Prices may continue to fall but rates likely won't.
My lady is quoting me for a refi. Since I am cashing out some on the refi, she says the rate is about 1/8 to 1/4 higher, and also the fees are $500 higher. Also, she says, that "once a cash-out, always a cash-out", and they will jack up rates even more on any other cash-out refi's, so get all the money you can now.
In Texas, Title Insurance is steep, my fees for a refi are like 3k, and she is quoting me a 5.25 for 15-year fixed. I currently have a 15-year at 5.875 (got a bunch of equity in the house, but facing college costs soon for my kids, figured I could get a lower rate, and cash out some).
In Texas, Title Insurance is steep, my fees for a refi are like 3k, and she is quoting me a 5.25 for 15-year fixed. I currently have a 15-year at 5.875 (got a bunch of equity in the house, but facing college costs soon for my kids, figured I could get a lower rate, and cash out some).
RedRaiders
Mr. +EV
I just locked in at 5.375 , no points at WB this morning on a 30 year. close in 6 weeks.
PIK95
Footballguy
I am going to refinance my house (6.25 now) along with a home equity loan I have that is seven percent. I set it up with my credit union yesterday and we are just gonna float the rate for a bit to try and get a little lower. On Tuesday when I called them to start it was 5.89% for 30-no points. Yesterday it was 6. I think I am going to pay the point to get lower anyway but does anyone have any good feelings where the rates are going this week? I read that the Fed is probably gonna lop off another half at the end of January so does that mean the morgage rates will drop a bit ahead of the Fed? Any good advice would be appreciated. I am going to call the credit union at noon eastern to check todays rate. I had it in my head all along I wanted 5.75 (plus I willbring it down by paying the point), is that a realistic goal? Can you pay more than a point? Two points? Thanks
Chadstroma
Footballguy
Sounds like you are going through a broker and typical things that usually say.... Are you taking out equity now that you really do not need because of her pressure? You will want to sit down and figure out the cost difference on of just re-fi your current loan and taking a equity line of credit out- the good news is that in Texas you use to not be able to take LOC's but now you can. It may or may not be cheaper (HELOC will have a higher rate) but it is worth looking at to get a lower rate on a bigger dollar amount, not pay interest on money you do not need now, etc. Brokers tend to not give these options because they tend to not want or can not deal with equities. How long you expect to be in the property?
AhrnCityPahnder
Yinz-o-riffic
what is WB?
redman
Footballguy
It looks like I'm going to be able to get 5.5% on the maxed-out conforming first.
Chadstroma
Footballguy
Really, when it comes to rates no one can take more than an educated guess on what rates will do. It is very hard to say on a weekly basis what rates will be like. The Fed and mortgage rates do not have a direct cause and affect so the expected rate cut by the Fed does not mean that mortgage rates will lower in anticipation or follow after. A couple of weeks ago when I was at a Wells Fargo mortgage office- it was very possible to get 5.5-5.75% on a 30 year so I would say 5.75 is realistic and yes you can pay more than a point if you want to. I would always encourage people to do a cost analysis of paying points to lower rates to figure out your break even point and the likelihood of you keeping the loan to past that point before doing so- also, another thing to keep in mind is that points are not tax deductable like interest is.
RedRaiders
Mr. +EV
Wachovia
OC Zed
Footballguy
Good for you, GB. Is there a prepayment penalty on your 2nd mortgage? I think the ones we were looking at had a penalty for payoffs within 12 months.It looks like I'm going to be able to get 5.5% on the maxed-out conforming first.
