seriousthistime
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Post by seriousthistime on Oct 4, 2013 20:47:28 GMT -5
Wouldn't your savings be reduced a bit by the fact that if you're paying a higher amount in interest, it is also tax deductible? What would your after-tax savings between the old rate and the new rate be?
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bean29
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Post by bean29 on Oct 5, 2013 9:20:11 GMT -5
Chiver, unless the lenghth of time the Condo has to be off listing is verified through underwriting, I would be a little leery. When I wanted to refi we had an exposed basement with a permitted basement finish in progress. One loan officer we have dealt with in the past told DH we could not refi until the remodel was complete or at least walls were closed. I walked into Chase -they held a 2nd and asked about refi. The guy said no problem we can do it. I told him what the other bank told us and he called his underwriter and found out they would not be able to do the loan until the walls were closed up.
It ended up DH also had to put outlet covers on for the appraiser to complete the appraisal.
We refi'd with a large local CU. I do think we might have closed faster with Chase bc DH is self employed and the CU had issues with verifying income. DH is a 1099 employee Exclusive Insurance Agent for a well known National Insurer. They basically did an Employment verification as if DH was an employee for us to get the loan closed. DH is 10 years with current co and 5 years before that as a Schedule C filer. So when people say it takes longer to close yes it does and whatever they ask for may not be rational. I think a lot if loan officers will say anything to get your deposit. Once they have your $ you are on the hook.
Sent from my MB855 using proboards
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Post by Deleted on Oct 5, 2013 9:48:16 GMT -5
chiver78, Don't worry, you didn't. I just hope that the loan officers are as up front with you as you are with them. I hate it when you think you've made a decision and then find out the sales person doesn't know his/her stuff. Reoflyte was a loan processor who has recently become a loan officer. She'll know the process inside and out! And I think it's great that you are looking into the refinancing. I like putting myself in a situation where I have multiple options because things don't always go as planned!
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chiver78
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Post by chiver78 on Oct 16, 2013 14:03:18 GMT -5
Are you seeing any loans with no points/origination at the 2% rate? I'd jump on those because the other fees are usually pretty low (appraisal, credit check, prepay escrow-again). If you can lower interest rate without the fees, I would do it. Do you have a credit union? Mine is showing 2.65% for 5/1 LIBOR and 3.0% for 7/1 LIBOR or 4.1% 30 yr fixed so their rates are pretty good. what is the difference between a LIBOR and an ARM? I'm not familiar with that loan type. bumping this thread overall b/c my listing was pulled from MLS yesterday. I'm reaching back out to the lenders I spoke with a couple weeks ago, as well as my current lender - who randomly had someone leave a voicemail for me today - to see what they can offer. ARM rates are a couple ticks lower than they were, hopefully that means some lower rates for me.
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Plain Old Petunia
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Post by Plain Old Petunia on Oct 16, 2013 14:13:02 GMT -5
LIBOR is the index the ARM is tied to.
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chiver78
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Post by chiver78 on Oct 16, 2013 14:15:18 GMT -5
that's what I thought. but the post I quoted makes it sound like that's a different sort of loan type.
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Plain Old Petunia
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Post by Plain Old Petunia on Oct 16, 2013 14:35:18 GMT -5
ARMs can be tied to something other than LIBOR, so I'm guessing calling it "5/1 LIBOR" is just to specify what it is tied to.
Have you made a decision?
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chiver78
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Post by chiver78 on Oct 16, 2013 14:55:59 GMT -5
decision to refi or not? not yet. I just reached out this afternoon to the lenders I'd spoken with that only needed one day off market to refi. I will be calling my current lender when I leave the office in a few minutes, as well as my credit union.
once I have all the numbers, I'll come back here for you math whizzes to crunch it all. if it makes sense, I'll refi. given the lack of any sort of response from my realtor after I sent back the cancellation forms, I'll likely wait the full 6 months to re-list with someone else and avoid having to worry about whether I'll owe her commission (stupid contract fine print) or not. totally over that whole working relationship!
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Plain Old Petunia
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Post by Plain Old Petunia on Oct 16, 2013 15:07:22 GMT -5
PenFed has a no cost ARM, fixed at 2.75% for the first five years. However, if you do not keep the loan for at least 36 months, they will charge you a pro-rated amount for the closing costs. I mention this not because I think it would be a good option for you, but because I think you should be cautious that the loan you choose (if any) does not have any such requirement.
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chiver78
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Post by chiver78 on Oct 16, 2013 15:10:42 GMT -5
yikes, thank you. that is another pointed question I will ask all of the lenders I'm speaking with!
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chiver78
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Post by chiver78 on Oct 16, 2013 15:53:35 GMT -5
hmm....I just got off the phone with a rep for my current lender. my lender has enlisted Freedom Mortgage to call current customers to offer lower interest rates w/o any of us asking for them. I am waiting for the official package to be sent out in the next day or so, but I did get some questions answered as well as some rough numbers.
-I cannot convert my loan to an ARM for a lower rate, all that is available for this no-fee thing is a 30-year fixed, with the timer restarting. (ugh) -there are no fees to the customers for this transaction (I'll believe it when I see it in writing)
-my interest rate will drop from 5.5% to 4.75%, with a rough savings number of $225/month.
on the surface, that's pretty sweet - instant savings w/no payback period to calculate. I definitely plan to gather numbers from those other lenders and see if something else makes more sense. if it doesn't, I'm likely going to take this offer. the only negative I see right now is that I'm back to a new 30-yr note and almost none of my monthly payment is principal.
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Post by Deleted on Oct 16, 2013 16:22:03 GMT -5
. if it makes sense, I'll refi. given the lack of any sort of response from my realtor after I sent back the cancellation forms, I'll likely wait the full 6 months to re-list with someone else and avoid having to worry about whether I'll owe her commission (stupid contract fine print) or not. totally over that whole working relationship! I'm not sure you're understanding your listing contract. Many Association of Realtor forms state that if you sell your home to someone the real estate agent showed your property to you owe them a commission. But that condition is waived if you re-list with another real estate agent. And really to enforce that clause they should provide you with a list of names of the people to whom they showed your property. The reason behind this is to keep a buyer and seller from making a deal directly with each other and screwing the agent out of a commission, when in fact the agent was the procuring cause.
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chiver78
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Post by chiver78 on Oct 16, 2013 16:33:29 GMT -5
I may be misunderstanding that the clause is waived if I re-list, but the rest of that makes perfect sense to me. I definitely would want to check that particular nuance to make sure it is the case in MA, because I would fully expect this realtor to attempt to enforce it if there was any chance of her being able to. she's from the side of the family that's good like that. as far as providing me with a list of names, I didn't even get the sign-in sheets from the open houses she held. yeah....totally not going to be re-listing with her. I sent in the cancellation form and haven't heard boo from her since, not even an acknowledgement that she received it. I looked up my own address on zillow this morning to see if it had been pulled yet.
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Plain Old Petunia
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Post by Plain Old Petunia on Oct 16, 2013 16:38:47 GMT -5
hmm....I just got off the phone with a rep for my current lender. my lender has enlisted Freedom Mortgage to call current customers to offer lower interest rates w/o any of us asking for them. I am waiting for the official package to be sent out in the next day or so, but I did get some questions answered as well as some rough numbers. -I cannot convert my loan to an ARM for a lower rate, all that is available for this no-fee thing is a 30-year fixed, with the timer restarting. (ugh) -there are no fees to the customers for this transaction (I'll believe it when I see it in writing) -my interest rate will drop from 5.5% to 4.75%, with a rough savings number of $225/month. on the surface, that's pretty sweet - instant savings w/no payback period to calculate. I definitely plan to gather numbers from those other lenders and see if something else makes more sense. if it doesn't, I'm likely going to take this offer. the only negative I see right now is that I'm back to a new 30-yr note and almost none of my monthly payment is principal. Do you owe 360k on your house? If you owe less, then some of that $225 mo savings is due to the term being longer, not due to the interest rate going down. In other words, not true savings. If you don't want to reset the mortgage clock, then calculate what you need to pay per month to finish on your current schedule. It should still be less than you are paying now. You can use the bankrate.com calculator.
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chiver78
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Post by chiver78 on Oct 16, 2013 17:17:52 GMT -5
I owe about $227k, and yes I recognize that some of the value is due to the longer term. should I just be using a basic calculator to figure out payments on my current schedule? the other times I refinanced over the years, my only goal was lowering my payment (which should have told me something... ) I have a feeling my decision's going to come down to whether it's worth the fees associated with refinancing with one of the lenders that answered my Lending Tree inquiry to get an even lower rate, or whether I just take the .75% rate reduction and say thank you. I guess it depends on how quickly I think my place will sell in the spring, and whether I'll have "paid off" the fees by then.
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Post by Deleted on Oct 16, 2013 17:30:22 GMT -5
I took the rate reduction you described, but it was with Chase. It was also a slight term reduction . . . 20 years when I still owed probably 25. It really was no-fee, no-problem. The rate reduction was from 5.875% to 4.5%. You get to skip a payment when you refinanced, but I made that toward principal.
I don't know how old you are, but I'm 59. I want my house paid off. It won't be by the time I retire, but I'm hoping that it will be 7 years later. I know your goal is to get rid of this condo, and I eventually will feel the same about my house. I know what it is worth will not be what I paid for many years so I am trying to make certain that I am never truly underwater.
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haapai
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Post by haapai on Oct 16, 2013 18:23:08 GMT -5
I would approach this question by first doing some very quick and very sloppy math.
First multiply your existing principal by the reduction in interest rate to get a rough approximation of your annual pre-tax interest savings.
Then adjust the number to reflect the mortgage interest deduction. Use 1-MTR.
Then, if you are still interested, you can crunch out amortization tables and ponder the mortgage interest deduction to get more accurate numbers.
I think that you should do this exercise to push that $225/mo number out of your head.
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chiver78
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Post by chiver78 on Oct 16, 2013 18:31:50 GMT -5
MTR?
and no worries, I honestly don't have "a number" in my head.....I'm actually okay with my payment as it is. I guess I've come full-YM circle in adjusting my life to the financial commitments I've made. if I can lower that out-go with a refi that makes sense, I will. today's call really is a no-brainer if the rest of the options don't make sense. even if it isn't the $225/month number when I calc it out to my current repayment schedule, it's still less than I'm paying now and at a lower interest rate.
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Plain Old Petunia
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Post by Plain Old Petunia on Oct 16, 2013 18:34:04 GMT -5
I owe about $227k, and yes I recognize that some of the value is due to the longer term. should I just be using a basic calculator to figure out payments on my current schedule? the other times I refinanced over the years, my only goal was lowering my payment (which should have told me something... ) I have a feeling my decision's going to come down to whether it's worth the fees associated with refinancing with one of the lenders that answered my Lending Tree inquiry to get an even lower rate, or whether I just take the .75% rate reduction and say thank you. I guess it depends on how quickly I think my place will sell in the spring, and whether I'll have "paid off" the fees by then. Use this one: www.bankrate.com/calculators/mortgages/mortgage-calculator.aspx Plug in your 227k, your 4.75%, and whatever time you have remaining on your existing mortgage. It will calculate what you need to pay in P&I each month to stay on the same schedule. $227k @ .75% for 1 month is $141.88. That is how much interest you will save the first month. So, if you're paying no closing costs, I think it is worth it. Or more correctly, it would be worth it to me. YMMV.
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Plain Old Petunia
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Post by Plain Old Petunia on Oct 16, 2013 18:37:12 GMT -5
MTR? and no worries, I honestly don't have "a number" in my head.....I'm actually okay with my payment as it is. I guess I've come full-YM circle in adjusting my life to the financial commitments I've made. if I can lower that out-go with a refi that makes sense, I will. today's call really is a no-brainer if the rest of the options don't make sense. even if it isn't the $225/month number when I calc it out to my current repayment schedule, it's still less than I'm paying now and at a lower interest rate. Marginal Tax Rate.
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chiver78
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Post by chiver78 on Oct 16, 2013 18:43:46 GMT -5
I took the rate reduction you described, but it was with Chase. It was also a slight term reduction . . . 20 years when I still owed probably 25. It really was no-fee, no-problem. The rate reduction was from 5.875% to 4.5%. You get to skip a payment when you refinanced, but I made that toward principal. I don't know how old you are, but I'm 59. I want my house paid off. It won't be by the time I retire, but I'm hoping that it will be 7 years later. I know your goal is to get rid of this condo, and I eventually will feel the same about my house. I know what it is worth will not be what I paid for many years so I am trying to make certain that I am never truly underwater. I am 35. I am well aware that the market isn't what it was when I bought, and I've already written off my old down payment in my head. my goal in selling this place (eventually, now) is to clear what I owe, and hopefully walk away with some cash. I've rounded up my mortgage payment for the past year and a half or so, but other than that I have focused my savings into other avenues. the rep I talked to today said I could go with a 15-yr note, still fixed, if I wanted to. she's going to send me all my available options in a spreadsheet by EOB tomorrow, I'll take a look at that option too. I know I want to save as much as I can overall, but the secondary goal is to lower my payment to reserve cash for the next transaction. I was also told that I could skip a payment with this no-fee "refi", I will be putting that back into the savings account I raided earlier this year for some car repairs....that I haven't fully re-funded. I'm already planning to do that with the "extra" paycheck in November, so between the two I'll be better than back to where I was!
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chiver78
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Post by chiver78 on Oct 16, 2013 18:46:13 GMT -5
MTR? and no worries, I honestly don't have "a number" in my head.....I'm actually okay with my payment as it is. I guess I've come full-YM circle in adjusting my life to the financial commitments I've made. if I can lower that out-go with a refi that makes sense, I will. today's call really is a no-brainer if the rest of the options don't make sense. even if it isn't the $225/month number when I calc it out to my current repayment schedule, it's still less than I'm paying now and at a lower interest rate. Marginal Tax Rate. thanks. what is that? I've never heard that term before. I know more than the Average Jane about finances, but I still shouldn't be allowed to sign anything without a sanity check!
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Plain Old Petunia
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Post by Plain Old Petunia on Oct 16, 2013 18:53:13 GMT -5
It's your highest income tax bracket. That is the one which counts because that is how much an additional dollar of income will be taxed.
Since mortgage interest is tax deductible, if you're itemizing, reducing mortgage interest means paying more tax. It doesn't mean you shouldn't do it, but it's good to be aware of your true savings.
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wewillsee
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Post by wewillsee on Oct 16, 2013 19:20:02 GMT -5
I'm not a fan of paying closing costs. Typically a lender can do a no closing cost refi but your rate is a bit higher. Maybe it goes from 4% to 4.125% or something similar. Rather than using a larger mortgage broker company like quicken, you may want to ask your friends, relatives, colleagues, etc. if they know a good mortgage broker. That may be you best bet.
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Post by Deleted on Oct 16, 2013 22:03:35 GMT -5
I'd take the no fee fixed if you are not finding any no fee ARM options. I don't think you should care that the 30 year clock starts over since you know you will sell eventually (even if fate wants you staying there a little longer). Reducing your payment by $225 at no cost is a sweet deal & that's $225/month to put in the cute little cottage down payment fund!!
Regarding the LIBOR ARM. You need to pay attention to what interest rate index and formula is used, just in case you still own it at the rate re-set point. Some banks have peculiar formulas tied to other indexes. A rate that is based directly on LIBOR seems more predictable and stable (my preference).
Foxboro Federal for example offers a 5/1 ARM with the interest rate tied to the weekly average rate of US Treasury Securities adjusted to a constant 1 year maturity plus the 'banks margin' rounded to the nearest .125% . . . . so that would take some work to figure out what your future rate might adjust to. Quicken won't even tell you what they tie the ARM to, so it is probably a confusing, difficult to figure out index that you will find out about when you are signing the loan papers!
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chiver78
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Post by chiver78 on Oct 17, 2013 11:06:41 GMT -5
damn, PB ate my reply. so one of the other lenders came back today with a 3.25% on a 5/1ARM. I've asked for a confirmation of fees b/c his original proposal said $2500 while the website says $1310. I've also asked which index the ARM is linked to. if I can get him to commit to the $1310 in closing costs, I think that's going to be the best option. lower rate AND pretty low closing costs. <fingers crossed> as far as asking other people, most of my friends/family/colleagues weren't all that impressed with their brokers. nobody had any tips. my CU was a no-go too.
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chiver78
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Post by chiver78 on Oct 17, 2013 12:34:11 GMT -5
okay, number crunching time. I've been looking at this for a few minutes now and my head hurts already balance - $227k current rate - 5.5% current P+I - $1383 option 1 - lower rate on 30-yr fixed from current lender, no fee new rate - 4.75% option 2 - 5/1 ARM with various rates/fees 3.25%, $2500 fees 3.5%, "$1400 lender credit toward fees" which I asked for a confirmation that it is indeed $1100 cost to me 3.75%, no cost or I can roll the $2500 into the balance refinanced for the 3.25% help?
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Post by Deleted on Oct 17, 2013 14:09:57 GMT -5
I'd probably go for the 3.75 "no cost" option. You'll lower your payment, won't add to your balance and will have a fixed payment for 5 years. Just be sure to take a hard look at the max payment, margin, et cetera "just in case".
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chiver78
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Post by chiver78 on Oct 17, 2013 14:50:09 GMT -5
that's the direction I was leaning, putting it up against the 4.75% fixed from my current lender, it still comes out ahead. and I have zero intention of still being in this house 5 years from now when the rate resets. using a basic "calculate my payment" the other two rates don't make a marked enough difference in payment to make it worth the fees.
as far as the rest of all that stuff in your comment, I am so completely lost with that. sails right over my head. should I give the accountant that does my taxes a call before I sign anything? I can't imagine it's going to make that much of a difference.
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haapai
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Post by haapai on Oct 17, 2013 15:53:34 GMT -5
The accountant might be able to help you quite a bit. The quick and dirty math that I did doesn't account for the reduction in principal so it over-estimates interest savings and underestimates payback periods. It also isn't fine-tuned for fees rolled into the balance and isn't adjusted for the P&I payments that you will actually be making.
An accountant should be able to push out those amortization tables PDQ. An accountant should know your marginal tax rate and check for the ways that applying MTR will lead to bad conclusions. An accountant should be able to calculate a new P&I number for you. An accountant should understand the terms of the loans that you are considering well enough to verse you on how high the P&I could possibly get and how fast and how many times the relevant index has done something like that.
If you have the right info and know how to ask the right questions, an accountant should be able to cut through this fog pretty quickly.
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