Refis are hot right now.
 

I just locked at 4.625% for 30 years. No points low closing costs. Chase even has 4.875 up on their website as the rate.

The lender required a credit score above 730, equity above 20%, and income requirements, but if you are in good shape you can get a really low rate.

Wow, that's pretty good. I just refi'd around Feb., but I'm going to have to look into another round.

How much are the fees associated w/ refinancing?

Depends on the size of your loan because mortgage deed tax and origination fee are calculated on the size of the loan.

Generally can be $4000-7000 on the average loan so you have to do a cost benefit analysis to see if it is right for you.

My refi will cost me $4800 in fees, but I get back $700 on my taxes for the discount point. Out of pocket is $4100.

I plan to keep my payments the same and pay off sooner, but my interest expense saved works out to $36,000 over the life of the loan. Now I will lose a third to taxes because this expense was deductable so I will get in reality $24,000.

The you can do all you present value stuff, blah blah but I am rolling the $4100 into the loan. I'll save $20k over 20 years. Worth it to go through an hour of paper signing.

I hate to be the bearer of bad news, but for a refi discount points must be amortized over the life of the loan. So if you closed today, you'd get about just under a dollar in tax benefit ($700/360/2) for '08.

I hope that doesn't make or break your cost-benefit analysis!

My personal philosophy is to never pay points on a refi. (I don't recall ever paying them on an original mortgage either)

True, I amortized the last one but my amortizing only lasted three years and then I moved so I got a big bump the third year. On my first refi, I did not know about the amortizing rule and the irs did not catch it. Not sure if it is a flag now in the computer.

I think there is a typo in your original post. You LOCKED in a 4.65% rate for 30 years? Do you mean you locked in a 4.65% rate on a 5year term amortized over 30 years?

The longest term mortgage obtainable in Canada is 7 years to the best of my knowledge and even the 7year thing is fairly new.

4000-7000 dollars to refinance a mortgage? That is crazy! I work for a bank and I refi mortgages here in Canada for $439 and I can even pay that for you at the sacrifice of a tad higher interest rate. 4000-7000 must be with a penalty and a crazy penalty at that. Canada mortgage break penalties are 3months interest FYI

It is hot but with prices of homes dropping. You better hurry before there is little to no equity to refi.

but then again just 4 months ago I was allowed to sell 40 year amortized mortgages with a $0 downpayment. Funny thing is you didn't even really need good credit. Just a "C" or better... not sure what that converts to in beacon score though. Give it a year or two and the mortgage market in Canada will being to unfold like that of the USA.

:rofl:
very true!

7 years is the longest term?!! Does that mean that the payments are scheduled such that the principal will be paid in full within 7 years, or does it mean that at the end of 7 years there is effectively a "balloon payment" that you must pay (or refinance the remaining principal with a new mortgage)?

In the US, most primary mortgages have a 15 or 30 year term, and payments are scheduled such that the principal will be paid off by the end of the term. However, my secondary mortgage had a 15 year term, but the payments were scheduled such that I would've had a balloon payment scheduled at the end of that term if I had made the scheduled payments.

I believe the OP is in MN, which last I heard is still in the US. :)

30 yr. mortgages are the norm here.

Just looked at 30 year refi's and saw 4.25, wow!

No worries here, housing prices have remained fairly stable in Austin, and I have 45% equity. My house has dropped $1,000 in value over the last 30 days per Zillow.

I know what you mean. Depends on the area definitely! My boss' home which is in a nice area of Katy has dropped 15 to 20k. He's looking to refi though since he has a good bit of equity like yourself. :thumbup:

I'm working on a 5% 30 year fixed mortgage with a total refi cost of $1200. It's a special program Bank of America has going for some clients. I'm just waiting for the rate to hit 5%, they are checking daily for me.

OK, i'm really confused.
In Canada, we can amortize a mortgage (length of time in which your mortgage is completely paid off) up to 35 years. However, we can only lock in an interest rate for a maximum length of 7 years before having to re-negotiate.

Keep in mind that your amortization will not change unless you want it to. But, you will sign for a new term and a new interest rate after the 7 year term.

So... assuming you begin with a mortgage of 200K amortized over 35 years.
First term is 7years at 5% (at the end you have 28 years remaining until you own your home free and clear)
Second term you decide to go for a 3 year fixed rate. (at end 25 years remain)
Then you do 5 consecutive 5yr fixed rate terms. At the end your amortization is 0 (meaning you owe no money to your mortgage lender and the house is completely owned by you).

I find it very very difficult to believe that any lender will guarantee a set interest rate for the next 30 years on anything. This is just ludacris.

So did I explain where i'm coming from a little better? Is the US completely different than Canada with respect to mortgages?

s2kobsession -- yes you really can lock in a fixed rate for 30 years in the U.S. It was considered the normal thing to do until the ARM's became the sexy tool to use in the late 70's or early 80's. If everyone had locked in fixed rates, we wouldn't be looking at the total collapse of the housing market now because those that couldn't afford the fixed rates wouldn't have been given mortgages. That is, of course, my humble opinion.

As to why a lender would guarantee a set interest rate for 30 yrs on anything -- I assume they don't expect you to actually keep the house for the full 30 yr. period.

That's interesting that Canada generally does it differently. From a lender's perspective, Canada's method definitely makes more sense. But, as a borrower, I'm definitely glad I was able to lock in my relatively low rate for the full amount of time that it will take me to pay off my principal. It would seem much more risky to amortize my loan over a 30 year period, but only lock in my interest rate for 7 years. You'd be wagering that you'll still be able to get a good interest rate 7 years from now (or that you'll be able to afford higher payments if the rate goes up). That sounds a lot like an ARM to me.

At least in the not too distant pasts, mortgages were usually securitized and sold to investors. These mortgage-backed securities were often structured to be relatively safe since the riskiest tranches were retained by the issuer, and they could be backed by L/C's for liquidity and credit enhancement.

People and institutions buy long term US Treasury bonds all the time, so why wouldn't they also buy similar duration mortgage-backed securities w/ a higher yield? (forgetting about recent events, back when everything was hunky dory)

Even if retained on balance sheet, the underlying interest rate risk can be hedged...maybe one day Canada will learn about such things. ;)

Here in the US, you can even get 40 year fixed rate mortgages!

Well, we qualify applicants based on inflated rates. Not the rate they are actually going to pay for their first "term" if you will. This gives a bit of a cushion incase interest rates are to rise. But your right, this is still very much risky for applicants because really, anything can happen in the economy. Proof of this is being seen right now.

As far as anyone preferring a fixed rate for 30 years? What are you nuts? Consider our (Canada's) method as "dollar cost averaging". I know everyone knows what this term means relating to investments, but put a spin on it from a borrowing point of view.

You could sign your mortgage agreement (in the USA) at a time when interest rates are higher and pay that higher interest rate for the next 30 years? Of course, you could get out of it and re-finance but penalties and fees are involved. On the other hand, in Canada you will sign for a 5year term at 6% and then a 5year term at 4% and maybe one at 7% and then maybe a variable rate mortgage for 3%.... all at different points in the market.

I relate a 30year mortgage as buying 3,000 shares of AAPL all at one price rather than 20 here, 50 there, 10 here etc. It just doesn't seem like a smart thing to do.

In Canada we can do the same thing with personal loans (to buy a car or trailer etc) for as little as a 1year contract (for rate), but a maximum of 5year term that it's paid off in. Very interesting indeed!

However, within a year or two Canada is going to see a similar problem to that of the US. Mark my words. I sold many many ZERO down payment mortgages amortized over 40 years (yes, FORTY years) that are basically designed to get low income earners into homes. Well it just so happens that these low(er) income earners have proven to be the ones laid off first, leaving them strapped for cash and not making mortgage payments. This is just starting to unfold right now......

It's similar to dollar cost averaging... with the difference being that Canada's method forces you to re-buy after a certain period. With stocks, if you happen to get in at a really good price, you're not forced to buy in again later. You can keep them as long as you want. Same way with mortgages in the US. If you get a really good rate, you're not forced to get out and get back in again. With stocks, if the stock price does drop, then you're free to pay your broker's trading fee and buy another lot at the lower price. To me, that's the same as re-financing your current fixed-rate mortgage.

^
I agree with Chris. During the summer month houses in my area were selling left right and center. Most of the house in nice area were sold within 1-2 weeks being in the market. Right after Lehman brother filed for chapter 11 the housing market in Canada is starting to fall.

As of now,I'm seeing more and more housing being put up for sale and nobody is buying right now. It's kinda scary IMO but maybe this will give me a chance to buy a nice house for less than half of what's it's worth.

I completely agree that they are very different from each other but at the same time they share the same characteristics.

I think our method of mortgage lending (Canada's) is far riskier for the customer than in the USA. However, in the USA it's far riskier for lenders guaranteeing the same rate for up to thirty years. Thirty Years is a very long time... I still can't believe that :lalala:

Interesting times indeed upcoming for Canada's mortgage market! Would really like to hear some other opinions on this.

Pearlwhite, I have seen the same thing in Cambridge less that 30 minutes away from you. At work, our fiscal year started the first of November. If I didn't have some big sales lined up I would really really be hurting right now. Not commission wise, but my boss would probably be kicking me out on the curb for being so far behind sales targets.

The problem is that there just aren't the numbers house shopping compared to the summer time. Considering 90+% of the people on s2ki are from the USA, they know all about this and I don't need to preach to the choir.

With the large amount of money that some of these banks got during the first round bailout you would think it would be less troublesome for 700 fico to refi a home at 25-30% LTV. Full Documentation definitions have changed since I did Full Documentation loans back in 2005.

It seems backwards that those in distress with their mortgage get a break whereas those homeowners that are financially sound and are just looking to refi to a lower rate are being made to jump thru hoops to get a deal. My brother in law is going thru this little adventure and I am shaking my head at all the stuff the loan officer is requiring to get this 4.625% fixed rate thru. The bank he is going thru got a 25 billion dollar bail out, but was recently quoted by the Wall Street Journal that they do not need to disclose where or how they spent that 25 billion dollar bail out.

Tan

We, in Canada, are getting shafted but aren't alone in that. The mortgage I got in Feb was prime - 0.25% so I'm paying 3.75%, sweet! But right now they are only offering loans at prime + 0.75% so the same variable rate loan a year later is 100 basis points more. That's just a profit grab, plain and simple.

I'm not complaining however :)

My P/I ratio is currently 45/55. In Canada variable rate mortgages have fixed payment amounts so I pay the same regardless of the current rate but more or less is applied to the principle. When the rate goes down I essentially make a principle repayment with the difference which lowers the total cost of the loan. I got the loan at a rate of 5.85% so that's what my payment amount is based on.

We just refi'd at 4.8% fixed for 15 years. Cost to do the refi was $800.


You gotta watch some of those "big banks" you are discussing....you are still paying points....effectively you are buying down to a 4 whatever percent...thus your closing cost are 4 grand and higher.

Hey Saltydog

I'm thinking about refi as well and was wondering where did you refi at?

I'm a loan officer and most banks do charge points. If you are not a perfect borrower then you have to buy down the rate. The OP said he paid no points yet his next post talked about how he could right off the loan discount which is a point. The bank is going to make their money either on the rate or in points for closing costs.

A local bank that I do all of my business with. All of my commercial stuff is with them too.





But to answer the post below yours....our 4.8% fixed for 15 was for anybody.


Yes, the bank will somehow make its money. A lot of people pay points either because they have less than perfect credit or they are not good negotiators. Your so called internet deals are point and click rates....there is no negotiating this. My suggestion is to always work with a local bank. You'll always be better off and they will work with you especially if you have other accounts with them....deposit, money market, checking and so forth.


Not that I'm a fan...but...I've heard credit unions have had very competitive rates lately. You have to "join" though. Joining involves what I've already discussed...deposit account, checking..yadda yadda yadda

Not everyone can qualify for a 4.8% :hello:

^^^ yeah, I agree with you. Sorry I didn't post it like that....you know what I meant though :hello:

my customer which I signed up to our open variable rate of prime - .75% are extremely happy with me right now :hello:

prime is currently 3.5%

My coworker's friend qualified for the 4.8 rate but cost was 9000 for the refi.

The surviving banks are greed driven due to the economics.

I'm paying 3.25% now :hello: My payment is almost 50% principal.

Just got another mortgage for my condo property at prime+1%, going rate went up to prime+1.5%. Still, 4.5% isn't too bad for a 1 year open ARM. I got the same rate for a HELOC.

Banks are loaning money to credit worthy customers with 20% down. Old school.

I'm starting the process to refi my current 30-year fixed (at 5.75%) to a 15-year fixed (likely to be 4.75%). Monthly payment will go up a couple of hundred (I can afford it), but I'll be saving $131,000 in interest over my original mortgage.

LOL! :hello:

Banks (both surviving and not) were greed-driven before this mess - it's called capitalism.

they bought the rate down by paying points

Yes, but now more than ever they are pretty bold on showing off how greedy they are.

What percentage of the US economy is Financial Services? If financial services are banking, investment and asset management primarily, what % should it represent in a normally functioning economy? 3-5%?

Presently it's over 15% of the US GDP. $0.15 of every dollar earned comes from banking and financial services, rather it comes out of the real economy. It's a cost to the real economy and it's unsustainable. You can't charge that much of a vig and expect people to keep up with the payments.

It's not greed, it's unrestrained capitalism. Unless the government controls the size of the financial services industry to something like 3-5% of economic output then it will continue to become top-heavy and crash again. It's funny that even now people think that finance have enough oversight. They are appointing a "car czar" to monitor the auto industry but have made no changes to finance which has sucked up almost 2 trillion dollars of taxpayer money and debt to get them out of the hole they dug.

Unrestrained, capitalism will devour itself. We've known that since the early 1800's yet we continue to let it happen time and time again. Capitalism is good but too much will kill you. It needs to be moderated and controlled.

Whaaaaaat?????? Unfettered and unrestrained capitalism isn't the be all and end all? You mean regulation and (horrors!) a certain amount of socialism might actually be healthy in a capitalistic society? Dear God, doomsday is upon us! :hello:

They didn't qualify for it....they bought it.

And none of that 9 grand went to principal












I just got a commercial rate at 4.5% on a 5 year adj. :hello:

Unreal

Wells fargo said he didn't qualify because his credit file was too thin. Even with a 750 score and a six figure salary. He had to buy down points to obtain the 4.8 rate. What a croc! Now the rates are back up slightly with Wells. That is what my coworker is relaying to me anyhow.

Underwriting fees $750.00
Loan Fee $500.00
Processing fee $500.00
Document fee $250.00
Appraisal fee $1000.00 (its a drive by too)

From a bail out beneficiary bank with ads on TV. If you take bail out money you are suppose to make it easier for customers to lend, not raise your bank lending fees. "That is greed" not economics.

We did not pay it of course because three years ago those fees did not exist or were a lot less. But if you look at the disclosures with the fees it all shot up astronomically.

Tan

Many points about rate but no mention of APR

Rate may be 4.5, 5, etc, but you factor in costs to you loan your APR is 1-2% higher and your agreed rate is S***

"There is no such thing as a free loan"

Money costs lets say is 1% (Very generous)

I lend you 400k @ 4.8%.

How do I run my business, pay salary, and profit @ 3.8 Net operating income?

Unless your rate is the SAME as your APR you have just been duped.

Points are a common term but actually mean fees. Paying no points, but paying fees is contradictory. The only fees that are acceptable are 3rd party fees (ie appraisal, title and escrow)

^ good point, I always look at the note and the APR, to determine the fair factor.

Tan

3.8% in your example is gross interest margin, not net operating income. You make it work by increasing your volume, selling financial services, and hitting your customers w/ fees for everything you can get away w/. You also lend to a wide spectrum of credits w/ risk-adjusted yields.

Many bank loans to investment grade corp. customers @ <100 bps spread over LIBOR, which is generally accepted as their cost of funds for such transactions. (I realize that banks have multiple sources)

I'm refinancing at 4.875% fixed for 30 years at a total refi cost of $1,450. Not bad since my current rate is 6.375% fixed 30 that I got in summer of '06 when rates were quite a bit higher.

You work AGFS too? :)

You're right, but have the wrong industry. Any loan made with a rate that low is a shot below the belt and the more money lent the worse it is.

HEAR THAT FOLKS!!!???? If you can prove your income Full Doc and have decent credit now is most certainly the time to get a rate so low it hurts :hello:

My mortgage rate is down to 2.75% as of a week from Sunday :hello:

Of my 80/20 split from 2 years ago (100% no PMI) my 20% is down below 4% (started at 9.5%!!) while my 80 is (unfortunately now) locked at 6.2%.

Have a variable rate now is king.