Mortgage Interest Rates

[Gray_Panther]

Originally Posted by dmk08

Yep same here. Payment went up less than $100 going from a 30 to a 15 and I was only 5 years in. It was such a no brainer.

Definitely worth it if you are early on in the indentured servitude game. I am starting my third year into this death pledge.

Even though I throw extra onto principal as much as possible, I see myself in this for for several years or less. Cutting down the rate has helped us immensely. I feel like a small burden was lifted off, can't imagine what it is like to not have a mortgage anymore.

[someguywithanm3]

Originally Posted by corn18

I had one of those back in 2006! My broker found a way to get me a $435k, 0% down, 30 year, interest only mortgage with a 48% debt to income ratio. I was so happy! Then I wasn't.

Ouch

[bmwv]

in November i got 15 year 2.125 no fees

[David70]

Originally Posted by oVeRdOsE.

go to the bank and take what's on that day. You may have +/- 2 weeks to take the decision and wait for the market too move. If its higher, for your loose. If lower, lucky you.

Originally Posted by RickFLM4

It may be more like a 5 year ARM here. Amortizes over a longer period (principal) but borrower and bank only locked into rate for 5. Again not sure but that would be my guess.

Above says he might have +/- 2 weeks to make a decision when the 5 year term is running out which doesn't sound like ARM's we have. I think our ARM's are set to go for years with the variable rate, no requirement to refinance.

Also add getting an 5 year ARM can make sense when interest rates are high or you are pretty sure you won't be in the house 5 years from now.

[RickFLM4]

Originally Posted by David70

Above says he might have +/- 2 weeks to make a decision when the 5 year term is running out which doesn't sound like ARM's we have. I think our ARM's are set to go for years with the variable rate, no requirement to refinance.

Also add getting an 5 year ARM can make sense when interest rates are high or you are pretty sure you won't be in the house 5 years from now.

I meant they are likely similar in that they do not amortize the principal over 5 years. They may amortize principal over 30 (or whatever term is specified) but require either accepting the new rate or refinancing. Yes an ARM just changes without the need to accept it, but can also be refinanced.

[vreihen16]

Originally Posted by dmk08

This is pretty much why the whole housing crash of 08 happened. People in 5 year interest only ARM loans and then the piper came calling....

When we bought our house in 2005, the mortgage company would only approve us for a 30-year 5/1 ARM with a 4.5% intro rate. I wanted a 15-year fixed, but wasn't in a position to argue at that point so I paid it on a 15-year schedule for the first five years just to spite them.

The first adjustment was after the bubble had popped, and our loan was written before anyone in the banking industry knew that negative interest was possible. A few months before the adjustment date, they started sending scary letters that our promotional 5/1 interest rate "could" go up significantly and that we should re-fi into a fixed 30-year to avoid that. Long story short, their pre-bubble-pop terms had a very bad interest benchmark (for them), and it had no limit on the floor for how far it could drop in a single adjustment. So, the first adjustment dropped our rate well below 1%!

Wait, it gets better! They had a ceiling on annual raises at 0.5%. If the interest rate for the second adjustment shot up to 25% overnight, it would take them five years just for our rate to reach 3% because of the annual ceiling.

After a few years of essentially free interest, they decided to cut their losses on our loan by selling it to another company who specialized with deadbeat loans and foreclosures. Picture a mortgage company who charges for taking *online* payments, doesn't process mailed payments until they are late enough to report on your credit even if mailed two weeks before they are due, and even charges $150 to send you a loan payoff letter so that you can finance away from them. Can you say predatory lending? Needless to say, I happily paid them the $150 for the payoff letter, and got my 15-year fixed from our credit union at 2.75% before we even had to make a monthly payment to that slimy mortgage company.

I have been paying the 15-year at an accelerated pace, and right now am on schedule to have it paid off in 48 months.

The morals of this story:

1) The only people making out on 30-year mortgages are lenders and sales brokers.

2) A 15-year mortgage only costs a few bucks more in monthly payments, but saves you big-time in interest. (See #1)

3) In retrospect, a 20-year fixed mortgage on day one would have been our bet option given our current payment history on a 20-year pace. My grandparents' mid-1950's mortgage was a 20-year loan. (Why isn't this a common mortgage option these days? See #1)

On a side note, our HELOC was approved yesterday after the credit union's appraisal came back higher than we (or even Zillow) were estimating. We should close in a week or two, and then the fun begins with building a custom retirement garage in a tax-friendly state.....

[corn18]

Originally Posted by vreihen16

1) The only people making out on 30-year mortgages are lenders and sales brokers.

Generally, true. But having 30 year money @ a fixed 2.75% is a good inflation hedge. If inflation goes above 2.75%, they are paying you to have the mortgage. I always look at the net present value of my mortgage. Right now, with inflation @ 1.8%, the NPV of my $510k mortgage is $554k. While the total interest is $239k over 30 years, that has to be discounted for inflation, which reveals the NPV. If inflation is 2.75%, the NPV = balance due. That's 30 years same as cash.

And I have that $510k invested in a 60/40 portfolio. Over 30 years, that should earn 5.6% real. That's a lot of extra savings in my pocket vs. paying cash for my house.

If rates were above 4%, I would pay off my mortgage tomorrow. As it sits now, I'll keep it until it's paid off in 2050.

[vreihen16]

My understanding of Canadian mortgages are that the payments are amortized over 25 years, but the loan is a 5-year with a balloon at the end for the remaining balance. There appears to be some sort of 5-year limit on the government's mortgage insurance, so everyone needs to re-fi their balloon at the end of five years to start the loan's insurance "shot clock" over again.

They also have "open" and "closed" mortgages, which have different rates based on whether or not you plan to pay it off early, sell the house, etc.....

[rebekahb]

Originally Posted by bmwv

in November i got 15 year 2.125 no fees

How did you get no fees?

[bmwv]

Originally Posted by rebekahb

How did you get no fees?

i just used loan depot. i told them i don't want to pay anything.

[masterzapper]

Just closed on a 15yr at 2.5% with minimal closing costs. They even waived the appraisal fee due to COVID.

[Hawkeye]

Originally Posted by oVeRdOsE.

go to the bank and take what's on that day. You may have +/- 2 weeks to take the decision and wait for the market too move. If its higher, for your loose. If lower, lucky you.

On my last renewal, the person in charge of my mortgage postponed our meeting 2 times, and and by the time the rate get up 0.8%. '''it was impossible to give me the rate 3 days ago, like impossible , like they can click on their computer the number''. I had to put my Karen face , and see the manager. lol it tooks about 2 weeks for them to get the % back, and they told me they are ''loosing money''' Ive almost cried.

I believe my renewal was in 2018, @ 2.92% for 5 years.

Last week my bro got a 1.43% for 4 years.

Also better the job you have, the more stable it is, the best mortgage you'll get. Better than someone with a 'normal' job.

Crazy how different it is, I am about to close and have to decide between a 15y at 1.875% and 30y at 2.25%. Probably end up with the 30y and just pay extra each month for some flexibility.

[Hawkeye]

Originally Posted by rebekahb

How did you get no fees?

He paid fees in the form of a higher interest rate, not a super uncommon option to have.

[corn18]

My advice to anyone thinking about a refi is to do it now. 10 year treasury is above 1% and I think inflation is already starting and will pick up once the Dems start giving away money. Get it while the gettin's good. I wouldn't hold out for an extra 1/4 point.

[spazzyfry123]

So we got the best rate we could (3.9%) with excellent credit on a 30 year fixed. We've only been paying on it for a little over a year with the intention to sell and move to our "permanent" house in hopefully three years or less. If I had my way we'd be making the move before 2022, but I'm waiting for the job to open.

For us, the only way I see this even remotely making sense is if the interest rate is lower and we pay effectively no closing costs. Does this exist? Learn me.

[corn18]

Originally Posted by spazzyfry123

So we got the best rate we could (3.9%) with excellent credit on a 30 year fixed. We've only been paying on it for a little over a year with the intention to sell and move to our "permanent" house in hopefully three years or less. If I had my way we'd be making the move before 2022, but I'm waiting for the job to open.

For us, the only way I see this even remotely making sense is if the interest rate is lower and we pay effectively no closing costs. Does this exist? Learn me.

Bankrate.com is showing 2.65% 30 year fixed with 740+ credit and no lender fees. Depends on your state whether they charge to refinance and you are responsible for that. I know in MD, it was 1% to refi for some sort of recording fee every time you refinanced. Here in OH, it's nothing. If you can get 2.65% and no closing costs (not even financed ones) it would be well worth your trouble.

[rebekahb]

Originally Posted by Hawkeye

He paid fees in the form of a higher interest rate, not a super uncommon option to have.

Makes sense. You've got a great deal going. I'm shocked at 1.875%

[spazzyfry123]

Originally Posted by corn18

Bankrate.com is showing 2.65% 30 year fixed with 740+ credit and no lender fees. Depends on your state whether they charge to refinance and you are responsible for that. I know in MD, it was 1% to refi for some sort of recording fee every time you refinanced. Here in OH, it's nothing. If you can get 2.65% and no closing costs (not even financed ones) it would be well worth your trouble.

I didn't realize that was a state requirement. We're in Florida with Bankrate showing some with no upfront costs.

I reached out to my lender to see what they have to say. Good place to start. Bad on me to assume that closing costs were mandatory in this situation and just sulking at my near 4% with today's rates.

[Littlebear]

Originally Posted by vreihen16

....

The morals of this story:

1) The only people making out on 30-year mortgages are lenders and sales brokers.

.....

Some of you are paying such low rates. If you can afford to invest the $$ above needed payments in something making a higher rate than the bank asks of you (stocks?), you make $$.
It does feel good, and it is wise to pay off your mortgage ASAP unless you can survive the insecurity.

Murf

[dmk08]

Originally Posted by bmwv

i just used loan depot. i told them i don't want to pay anything.

I assume you mean points not fees? If you do mean fees Im going to try that on my next purchase. “I just don't want fees”.

[Joekerr]

Originally Posted by David70

Interesting. For the common 5 year loan, is it really financing the complete balance? I got an original 30 year loan as this was something I could afford, then refinanced to a 15 year loan but getting a 5 year loan would end up with a giant payment.

Originally Posted by RickFLM4

It may be more like a 5 year ARM here. Amortizes over a longer period (principal) but borrower and bank only locked into rate for 5. Again not sure but that would be my guess.

Not sure what ARM's are, but you are amortizing the balance over a longer period (you choose usually somewhere between 10-30 years), but you are only locking in the rate (whether it be fixed or variable) for 5 of those years.

At the end of those 5 years you would theoretically choose an amortization period at least 5 years less than your previous one, but you don't have to.

[vreihen16]

Originally Posted by Joekerr

Not sure what ARM's are, but you are amortizing the balance over a longer period (you choose usually somewhere between 10-30 years), but you are only locking in the rate (whether it be fixed or variable) for 5 of those years.

A USA ARM (Adjustable Rate Mortgage) is typically 30 years, with a variable interest rate. With a 5/1 ARM, they give an initial low teaser rate for the first five years, and then adjust the rate every one year after that based on a published formula. Great for getting new home buyers into bigger mortgages than they can initially afford, and even desirable to buyers who don't plan to stay in a house for more than 5 years. You can also re-fi into a fixed or even another ARM as well.

On a fixed-rate mortgage, you lock in the interest rate for the entire loan duration before signing. The bank can't raise/lower it, but you have the option to re-fi into a new loan if the interest rate drops enough to make it worth paying for whatever new closing fees are required.....