House Refinancing - Any experiences?
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From: Livonia
not too shabby... from what you've answered... then yes, a 15yr fixed is your SAFEST bet...
But- for paying off your home the FASTEST (if that is your goal)- then it is not the SMARTEST bet. There are much smarter, faster and effecient ways of paying off your mortgage in a short period of time...
#1 being an Option ARM, or MTA Index based loan. What this is: MTA ='s Monthly Treasury Average. Your loan is based off of this index + a Margin (the margin can be negotiated with some banks). This loan is HIGHLY predictable becaue it is a 12 month AVERAGE. They simply take the indexes from March of 2004 up until March of 2005- Average out the figures and use that to create the next months Average-
So- this is still a very SAFE investment (not as safe as a 15yr fixed- but safe and effective enough to make a substantial difference). The index for this loan is typically calculated about 4 months ahead of time for you *(so you can get out of it when necessary- using your "no closing" cost option on a 15yr). The MTA is also known as a LAGGING INDEX. Which means that historically it falls approx. 2 years behind the Federal Reserves movements. Ie- When the 30yr fixed first dropped to 5%- the MTA was still at 7-8%. When the 30yr fixed bottomed out and began to climb- the MTA just hit it's all time lows... and it is still there now.
So- essentially- once the 30yrs start to move up- you have approx. 2 years of lower rates on this product.
HOW IT WORKS: This loan's rate will change MONTHLY (which is not bad- remember- you can predict the change many months ahead of time). Historically it has never changed more than .25% in 1 month. Your payment each month reflects the rate + remaining balance-
BENIFIT: The loan gives you 4 payment options every month! They will give you a fully amortized 30yr & 15yr calculations, and also an Interest ONLY and a Negative Amortizing teaser (1.25% -which remains locked for 1 yr, and then can only change 7% of the PAYMENT amount for the following 5yrs- afterwhich the entire loan RESETS!).
THIS IS THE MOST IMPORTANT PART!!: The rate will be approx. 4.125% (depending on your negotiated Margin).
I'm estimating that you owe $200,000k. (let me know if you've paid your balance lower).
@200,000k:
15yr Fixed @ 5.375%- Payment = $1,620.93. Of that- $895 goes towards Interest! So $725.93/month goes towards balance. After 5yrs (60 months) you'd pay off $43,555.80!
Option ARM @ 4.125% - Payment = $687.50 (INTEREST ONLY- THIS LOAN ALLOWS YOU TO PAY WHAT YOU WANT- WHEN YOU WANT- THIS IS THE MINIMUM!!!) So if you pay $1,620.93, Of that -$687.50 goes towards Interest! So $933.43 goes towards principle!!! After 5 yrs (60mos) you'd pay off $56,000.80
That is nearly $14,000 MORE! $14 grand LESS that the bank gets for housing your loan.
So now you ask... What happens after 5 years and the rate starts to go up?
This happens: The Option ARM NATURALLY REAMORTIZES ITSELF EVERY MONTH!!! Which means- when you pay off (ie) $56k- you're new remaining balance is $144k. If the rate goes up- your balance is still coming down. So (ie) if your rate when up to 6%- you're minimum payment would still be under $700 a month!
In a 15yr fixed... if you pay off $43k... YOUR PAYMENT IS STILL BASED OFF THE ORIGINAL AMORTIZATION AT $200K!! So no matter how much you pay off- you're payment remains the same.
This is the MOST POPULAR loan for investors, self-employed, commissioned and paying off homes faster.
People who are not savvy with their finances will go the traditional route of a 15yr fixed... those who take their finances into their hands and make the most out of their money (especially with your home being your BIGGEST liability AND asset)... will utilize these terms to manipulate their finances how THEY see fit... not how a BANK sees fit...
If you like it... let me know, and I will hook you up with someone who can provide the loan in your area (to be honest- I no longer do mortgages- otherwise like about 7 others on this site- I'd do it for you). If not- speak to Tim (efthimios) and see if he is capable. He specializes in creative financing and is LICENSED (very important). Plus he's not "starving" either... so he won't try and rape you on the rate like 70% of the rest of the brokers out there will!
But- for paying off your home the FASTEST (if that is your goal)- then it is not the SMARTEST bet. There are much smarter, faster and effecient ways of paying off your mortgage in a short period of time...
#1 being an Option ARM, or MTA Index based loan. What this is: MTA ='s Monthly Treasury Average. Your loan is based off of this index + a Margin (the margin can be negotiated with some banks). This loan is HIGHLY predictable becaue it is a 12 month AVERAGE. They simply take the indexes from March of 2004 up until March of 2005- Average out the figures and use that to create the next months Average-
So- this is still a very SAFE investment (not as safe as a 15yr fixed- but safe and effective enough to make a substantial difference). The index for this loan is typically calculated about 4 months ahead of time for you *(so you can get out of it when necessary- using your "no closing" cost option on a 15yr). The MTA is also known as a LAGGING INDEX. Which means that historically it falls approx. 2 years behind the Federal Reserves movements. Ie- When the 30yr fixed first dropped to 5%- the MTA was still at 7-8%. When the 30yr fixed bottomed out and began to climb- the MTA just hit it's all time lows... and it is still there now.
So- essentially- once the 30yrs start to move up- you have approx. 2 years of lower rates on this product.
HOW IT WORKS: This loan's rate will change MONTHLY (which is not bad- remember- you can predict the change many months ahead of time). Historically it has never changed more than .25% in 1 month. Your payment each month reflects the rate + remaining balance-
BENIFIT: The loan gives you 4 payment options every month! They will give you a fully amortized 30yr & 15yr calculations, and also an Interest ONLY and a Negative Amortizing teaser (1.25% -which remains locked for 1 yr, and then can only change 7% of the PAYMENT amount for the following 5yrs- afterwhich the entire loan RESETS!).
THIS IS THE MOST IMPORTANT PART!!: The rate will be approx. 4.125% (depending on your negotiated Margin).
I'm estimating that you owe $200,000k. (let me know if you've paid your balance lower).
@200,000k:
15yr Fixed @ 5.375%- Payment = $1,620.93. Of that- $895 goes towards Interest! So $725.93/month goes towards balance. After 5yrs (60 months) you'd pay off $43,555.80!
Option ARM @ 4.125% - Payment = $687.50 (INTEREST ONLY- THIS LOAN ALLOWS YOU TO PAY WHAT YOU WANT- WHEN YOU WANT- THIS IS THE MINIMUM!!!) So if you pay $1,620.93, Of that -$687.50 goes towards Interest! So $933.43 goes towards principle!!! After 5 yrs (60mos) you'd pay off $56,000.80
That is nearly $14,000 MORE! $14 grand LESS that the bank gets for housing your loan.
So now you ask... What happens after 5 years and the rate starts to go up?
This happens: The Option ARM NATURALLY REAMORTIZES ITSELF EVERY MONTH!!! Which means- when you pay off (ie) $56k- you're new remaining balance is $144k. If the rate goes up- your balance is still coming down. So (ie) if your rate when up to 6%- you're minimum payment would still be under $700 a month!
In a 15yr fixed... if you pay off $43k... YOUR PAYMENT IS STILL BASED OFF THE ORIGINAL AMORTIZATION AT $200K!! So no matter how much you pay off- you're payment remains the same.
This is the MOST POPULAR loan for investors, self-employed, commissioned and paying off homes faster.
People who are not savvy with their finances will go the traditional route of a 15yr fixed... those who take their finances into their hands and make the most out of their money (especially with your home being your BIGGEST liability AND asset)... will utilize these terms to manipulate their finances how THEY see fit... not how a BANK sees fit...
If you like it... let me know, and I will hook you up with someone who can provide the loan in your area (to be honest- I no longer do mortgages- otherwise like about 7 others on this site- I'd do it for you). If not- speak to Tim (efthimios) and see if he is capable. He specializes in creative financing and is LICENSED (very important). Plus he's not "starving" either... so he won't try and rape you on the rate like 70% of the rest of the brokers out there will!
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Joined: Oct 2002
Posts: 14,430
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From: OH
Just to touch on something Joe mentioned about the MTA index....it truly is predictable by giving you vision forward allowing you to estimate the change
One of the other amazing benefits are, as Joe mentioned (he never leaves anything out
) that it re-amms every month!!!
One of the other amazing benefits are, as Joe mentioned (he never leaves anything out
) that it re-amms every month!!!
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Joined: Dec 2003
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From: Irvine, SoCal
Originally Posted by thunderchicken,Mar 3 2005, 05:13 AM
The guy I've been dealing with claims he'll eliminate the closing costs and the rate on a 15 year is 5.375%, a little less than the bank, plus he'll eliminate the PMI.
Thanks for everyone's input. If anyone could just give me 200k, it would make this a lot easier
Thanks for everyone's input. If anyone could just give me 200k, it would make this a lot easier
Your home is your biggest investment, you need to understand all the details of all loan options. You do not like to loose your home some years down the road because the ARM went though the roof. Most houses foreclosured in the last 10 years were with ARM. Many ARMs tied to T-Bill do not have cap, and the rate can be sky high.
There are many options: no point, no cost, fixed 15 years, fixed 30 years, 3 years ARM, 5 years ARM, .... You need to understand benefits and costs for each loan before making decision.
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Joined: Jul 2003
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From: Livonia
Originally Posted by TR-S2K,Mar 4 2005, 05:37 PM
thunderchicken,
Your home is your biggest investment, you need to understand all the details of all loan options. You do not like to loose your home some years down the road because the ARM went though the roof. Most houses foreclosured in the last 10 years were with ARM. Many ARMs tied to T-Bill do not have cap, and the rate can be sky high.
There are many options: no point, no cost, fixed 15 years, fixed 30 years, 3 years ARM, 5 years ARM, .... You need to understand benefits and costs for each loan before making decision.
Your home is your biggest investment, you need to understand all the details of all loan options. You do not like to loose your home some years down the road because the ARM went though the roof. Most houses foreclosured in the last 10 years were with ARM. Many ARMs tied to T-Bill do not have cap, and the rate can be sky high.
There are many options: no point, no cost, fixed 15 years, fixed 30 years, 3 years ARM, 5 years ARM, .... You need to understand benefits and costs for each loan before making decision.
1% per year and no more then 5% at some banks... 2% per year and 6% at most...
Scot... I'm not understanding your question.
And the # of foreclosures weren't due JUST to ARM's... it was due to uneducated borrowers, people trying to get more out of their home then what it was worth, shady lenders, job losses/income hits... etc.
What happens is some people want to get an ARM JUST to lower monthly payments... but instead of using the money they are saving constructively- they go and spend EVEN MORE! Some people simply spend what they make and that is it! So now that they are over-extended on their credit cards and credit... when their ARM matures... they no longer have the credit to refinance into a new ARM.
It is more the idiot BEHIND the ARM then the ARM itself!
Thunderchicken sounds more then capable of budgeting his expenses... and if he is doing this for such a purpose- I highly doubt that he'll put himself into foreclosure...
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From: OH
Originally Posted by joeking1978,Mar 4 2005, 06:08 PM
It is more the idiot BEHIND the ARM then the ARM itself!
Thunderchicken sounds more then capable of budgeting his expenses... and if he is doing this for such a purpose- I highly doubt that he'll put himself into foreclosure...
Thunderchicken sounds more then capable of budgeting his expenses... and if he is doing this for such a purpose- I highly doubt that he'll put himself into foreclosure...
-2nd because i've have some faith in our friend here
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Joined: Oct 2002
Posts: 14,430
Likes: 1
From: OH
Originally Posted by TeAs2kEr,Mar 4 2005, 11:42 PM
this thread rocks! ....great information here.