holy mortgage rates

[xiphoid2010]

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Locked in my mortgage rate about a month ago at 3.5% with 0.625% rebate at closing. Thought that was a great rate. Took another look today, SOB! The rates are 3.25% with no point, 3.375% with 1% back or 3.5% with 1.875% back.

Now would probably be a good time to refinance for a lot of people who got mortgage more than 6 months ago.

 

[confettiflyer]

I think Mark Zuckerberg's mortgage rate is 1.05% 1/1 ARM

 

[xiphoid2010]

I think Mark Zuckerberg's mortgage rate is 1.05% 1/1 ARM

Why does the man even need a mortgage? LOL.

But with a 1 year ARM I'm not too surprised. The 1 year treasury yield is like 0.17% right now.

 

[confettiflyer]

Why does the man even need a mortgage? LOL.

But with a 1 year ARM I'm not too surprised. The 1 year treasury yield is like 0.17% right now.

that's not a 1 year ARM...haha, it's a one MONTH ARM!

liquidity purposes...i'm sure he can use that $3-5M in some other way that makes it return > 1.05%. If rates rise, he can just pay it off.

It's practically free money.

 

[xiphoid2010]

that's not a 1 year ARM...haha, it's a one MONTH ARM!

liquidity purposes...i'm sure he can use that $3-5M in some other way that makes it return > 1.05%. If rates rise, he can just pay it off.

It's practically free money.

True that. I just hope he is not keeping that money in the FB stock.

 

[Momus]

Now would probably be a good time to refinance for a lot of people who got mortgage more than 6 months ago.

1/2% difference is insignificant... bank will charge you so many bull**** junk fees such as...

• Application Fees
• Underwriting Fees
• Processing Fees
• Warehouse Fees
• Administration Fees
• Amortization Fees
• Affiliate Consulting Fees
• Bank/lenders Inspection Fees
• Endorsement Fees
• Express Mail Fees
• Document Preparation Fees
• Origination Fees
• Miscellaneous Fees (anything else they want to ad)

and you will not come ahead trying to save 1/2% lol. Or even BS legitimate fees got jack up by them such as credit check $80 instead the normal $25... That's why they are advertising refinance at "no cost"... no cost my ass.

Why does the man even need a mortgage?

I never get this **** either, this is equivalent to me borrowing $1 over 30 years when I have $20,000 in the bank. I guess I can make a point to look "I can borrow for free and increase my liquidity by 1%!!! Yay, I am totally ripping off this banks!" But for what???

 

[xiphoid2010]

1/2% difference is insignificant... bank will charge you so many bull**** junk fees such as...

Mine isn't too bad. GFE shows ~$5K in total fees/insurance/taxes at closing. Will know for sure when I get the HUD-1. If you have a $300K mortgage, taking the 3.5% with 1.875% credit should cover the cost.

I'm using an internet based mortgage lender, so far so good (knock on wood). Brick and mortar banks tend to charge you significantly more. On the same day I locked in at 3.5% with 0.625% credit, Chase bank wanted 4% with only 0.25% credit.

 

[All4MyDaughter]

Mine isn't too bad. GFE shows ~$5K in total fees/insurance/taxes at closing. Will know for sure when I get the HUD-1. If you have a $300K mortgage, taking the 3.5% with 1.875% credit should cover the cost.

I'm using an internet based mortgage lender, so far so good (knock on wood). Brick and mortar banks tend to charge you significantly more. On the same day I locked in at 3.5% with 0.625% credit, Chase bank wanted 4% with only 0.25% credit.

WHAT?!? 5K to refinance? 😱 I refinanced at my (brick and mortar) bank with $299 fixed closing costs.

 

[confettiflyer]

WHAT?!? 5K to refinance? 😱 I refinanced at my (brick and mortar) bank with $299 fixed closing costs.

They made their money elsewhere, I can guarantee you that.

I think we spent $60 alone on the tri-merge credit report (we used CredCo).

 

[Unchained]

Mine isn't too bad. GFE shows ~$5K in total fees/insurance/taxes at closing. Will know for sure when I get the HUD-1. If you have a $300K mortgage, taking the 3.5% with 1.875% credit should cover the cost.

I'm using an internet based mortgage lender, so far so good (knock on wood). Brick and mortar banks tend to charge you significantly more. On the same day I locked in at 3.5% with 0.625% credit, Chase bank wanted 4% with only 0.25% credit.

Internet based mortgage lender? Holy bad idea to save a few bucks. Go with the brick and mortars like Wells or Suntrust.

 

[All4MyDaughter]

They made their money elsewhere, I can guarantee you that.

I think we spent $60 alone on the tri-merge credit report (we used CredCo).

Can't recall any other fees, though.

 

[xiphoid2010]

WHAT?!? 5K to refinance? 😱 I refinanced at my (brick and mortar) bank with $299 fixed closing costs.

I'm buying, not refinancing. If my closing is $5k, then refi shouldn't be more than that I would think.

 

[xiphoid2010]

Internet based mortgage lender? Holy bad idea to save a few bucks. Go with the brick and mortars like Wells or Suntrust.

I gather some recommendations including my old man who had used them before, their reputation seems solid. My experience is so far so good, they definitely seems to have their acts together and quick to respond. Yeah I would go with brick and mortar for the peace of mind, but 0.5% rate difference is no chump change.

 

[pezdispenser]

I think this is a good thing. I'm really hoping that first-time home buyers will take advantage of these super low rates and house prices to pull the housing market out of the slump.

WHAT?!? 5K to refinance? 😱 I refinanced at my (brick and mortar) bank with $299 fixed closing costs.

I think xiphoid2010 is talking about a new mortgage, not a refi, so his closing costs are higher. Actually, you have to be very careful when comparing closing costs because they can reduce them or give you a rebate (negative points) by increasing the interest rate. A $300k, 30 yr mortgage at 3.5% pays $184,970 in interest over the life of the loan but increasing the rate to 3.625% increases the interest by $7,567 to $192,537.

 

[All4MyDaughter]

I think xiphoid2010 is talking about a new mortgage, not a refi, so his closing costs are higher. Actually, you have to be very careful when comparing closing costs because they can reduce them or give you a rebate (negative points) by increasing the interest rate. A $300k, 30 yr mortgage at 3.5% pays $184,970 in interest over the life of the loan but increasing the rate to 3.625% increases the interest by $7,567 to $192,537.

For some reason I thought he was talking about refi.

And yeah, I know all that about the closing costs vs rate, having bought a couple of houses in my time.

 

[xiphoid2010]

I think this is a good thing. I'm really hoping that first-time home buyers will take advantage of these super low rates and house prices to pull the housing market out of the slump.

Where I am, there has a been an uptick on the housing prices and a significant drop in inventory. Last year this time, there were >9 months worth of inventory, it's down to ~6 months. While it can still be construed as a buyers market, it's not nearly what it was. The good deals are being picked off quickly while undesirable ones sticks around for a year or more.

I think those who graduated should take a look. While I don't think the interest rate will shoot up soon, I do think it's near bottom. There is still ~2% spread between 10 year treasury yield and 30 year mortgage rate, it still can to go down to the more historical 1.5% spread, but not much more than that. For those with capital and want to become landlords, now might be a good time to pick up rental properties on the cheap as well. Unfortunately many of the recent grads are saddled with huge student loans, and limited capacity to take on more loans.

For those who has significant equity in their house already, but still have student loans at 6.8%, I wonder if anyone had tried to do a cash out refinance, say go to a 15 year fixed at 2.75% + tax deduction and pay off the student loan at the same time.

 

[spacecowgirl]

We refinanced last year. Wanted to refi to a 15 yr but since we are upside down, we couldn't without a reappraisal. Sucks that we wanted to be MORE responsible but couldn't be. Damn housing crash. Oh well, we can always pay more on our 30 year I guess. My parents bought their first house in the days of double-digit APRs and can't get over the rates now.

 

[DedicationNSU11]

serious question: would anyone ever save 300k and then buy a house cash? If not, why?

 

[confettiflyer]

serious question: would anyone ever save 300k and then buy a house cash? If not, why?

I wouldnt...Tax benefits and the sheer amount of time it would take (most) of us to raise that kind of money. Mostly the second one.

Basically if you want to buy, can put 20% down, renting is more expensive, are planning to stay put...no use putting off that decision since it's costing you money each month.

Given house prices where I want to live I'd probably save $100k and use that as a down payment and get my LTV < 70-75%.

 

[pezdispenser]

serious question: would anyone ever save 300k and then buy a house cash? If not, why?

No, here's why:
- Extremely low interest rates. After taking into account the length (15-30 yrs), fixed interest rate, reasonably low security/collateral (20% downpayment), large amount ($100,000s), tax deductibility, etc, mortgages are probably the cheapest way to borrow money.
- You can leverage this cheap borrowed money. Even if you had $300k cash, you could invest it in other things and earn more than the interest on a mortgage. Sure, a lot of people don't want to do this, because they think it's too risky and they would rather not be in debt. That's fine. But understand that if you want to get really rich, or at least richer than this type of person, you need to take risks and invest. Having a high salary will not make you truly rich, especially if you spend it all, or in this case, plonk down $300k cash for a house. Investing and managing your finances well is far more important.

 

[confettiflyer]

In short, converting all of your liquid assets into something illiquid like a house is no bueno.

Besides, if you still look at a house as an investment, it can lose value like any other investment vehicle....depreciate, build a highway next door, burn to the ground, etc...

Leveraging gives you maximum flexibility.

 

[xiphoid2010]

serious question: would anyone ever save 300k and then buy a house cash? If not, why?

Not quite the same, but one reason to pay cash for a house is to avoid tax on investment properties. Say you bought an rental property for $300k a while back, now it's fully paid off and you depreciated it to $0 on paper, but in reality the property has appreciated to worth $400k on the market. Nowyou are moving to a different state, making it harder/more costly to manage. You can sell it for $400k but you will be hit by federal and state capital gains tax as well as depreciation recapture. That's a lot of tax. What you can do is buy rental property at the new place at roughly the same time as you sell the old one for $400k cash and avoid all that tax. Keeping it up, it theoretically possible to never pay tax even if it grows into millions.

 

[Momus]

Leveraging gives you maximum flexibility.

Also, it multiplies your loses and gain... Tell this to someone who buy in 2006... they got stuck underwater with their mortgage. These people lose all of their down payment. In places like California or Florida, that's -100% to -300% of their investment. I know some people over leverage their money, closed 3 houses in one day, and putting 20% down X3, only to see house prices going -35%. Not only this person losing all his down payments, now he is underwater for 3 mortgages.

House prices is normally tracked inflation, which is around 3-4% appreciation/year. We had been getting 7%/year appreciation, doubling house prices every 10 years, this is of course is unsustainable because average income does not grow 7%/year. Looking forward, it's safe to assume it will continue to appreciate about 3-4% just as much as income rises.

Prices can go down even more once the fed raises interest rates, people won't be able to afford to buy because their monthly mortgage payment will be big and that will lead to another depressed prices. However, I would admit there is not much wrong you can do buying at this time because price is depressed enough bouncing along the bottom. When the fed raises interest rate 2014-2015, you might already gain enough equity to offset price distruption (if there is any). And as a contrarian, buying an asset when everyone else is jumping out the bridge is usually a good move.

 

[PharmEcon]

that's not a 1 year ARM...haha, it's a one MONTH ARM!

liquidity purposes...i'm sure he can use that $3-5M in some other way that makes it return > 1.05%. If rates rise, he can just pay it off.

It's practically free money.

Interest payments are also tax-deductible- another benefit in addition to increased liquidity.

 

[confettiflyer]

Interest payments are also tax-deductible- another benefit in addition to increased liquidity.

Only up to the 1st $1M and subject to income phase out...so for someone like the CEO of FB, the tax deduction is like throwing a few cents at you or me.

 

[confettiflyer]

Also, it multiplies your loses and gain... Tell this to someone who buy in 2006... they got stuck underwater with their mortgage. These people lose all of their down payment. In places like California or Florida, that's -100% to -300% of their investment. I know some people over leverage their money, closed 3 houses in one day, and putting 20% down X3, only to see house prices going -35%. Not only this person losing all his down payments, now he is underwater for 3 mortgages.

That's why leveraging works so well, you use someone else's money...if you maximally leveraged in 2006 and bought a home with zero down payment, you actually ended up ahead if you got foreclosed. The fallacy in your argument is that the alternative would be your friend with 3 houses having paid cash for them, and NOT the sane/prudent person who may have avoided the whole mortgage mess.

Example: Momus buys 3 houses at $100k cash. Market pulls them down $35k each, so on paper he just lost $105k. PharmEcon buys 3 houses but puts $20k down x 3. All 3 drop by $35k and are eventually foreclosed (or DIL or sold short). Total loss = $60k (his downpayment).

So leveraging actually imputes your losses and gains and externalizes them.

Example: Say I got an 80/20 loan and put nothing down (ignore loan costs and whatnot for now). If I were the above two investors' neighbor, I go -35% and get foreclosed on because I walk away, my total loss is zero.

In fact, I probably got to live rent free for 2+ years (pretend we're in FL) because of the judicial FC requirement. AND the bank probably gave me $5000 to not trash the house.

Debt gives you options (just not the student loan kind, haha)

 

[confettiflyer]

Anyway I know what you're getting at with leveraging and multiplying gains/losses...since mortgages have a whole different set of laws/regulations regarding them vs. corporate law, it's probably not appropriate to use "leverage."

Over-leveraged companies can tip into bankruptcy and cease to exist, over-leveraged individuals whose over-leveraging is limited to a mortgage/trust deed can also tip into bankruptcy but obviously we're not shooting anyone or throwing them into debtor's prisons.

Plus many states have one-action laws and the remedy for failure to pay is often just taking back the house.

Anyway that's that.

 

[pezdispenser]

You also need to diversify. If $300k cash is all you have, and you plonk it down on a house, then all your eggs are in one basket. Obviously housing does not always go up. There will be times when other asset classes like stock, bonds, gold, etc. outperform property. Diversifying reduces the risk that you will underperform.

Furthermore, if you use mortgages to leverage, but all your investments are in property, then you are still not diversified, and you have multiplied your risk greatly.

 

[xiphoid2010]

You also need to diversify. If $300k cash is all you have, and you plonk it down on a house, then all your eggs are in one basket. Obviously housing does not always go up. There will be times when other asset classes like stock, bonds, gold, etc. outperform property. Diversifying reduces the risk that you will underperform.

Furthermore, if you use mortgages to leverage, but all your investments are in property, then you are still not diversified, and you have multiplied your risk greatly.

Let me add to this. Diversification is very important for savings up your retirement plans or any emergency /safety net. A good diversified portfolio is the way to reduce risk while earnings a good return.

But after you are socking away to ensure a comfortable safety net (eg, already maxed out on all tax advantaged retirement vehicles), what to do with the investment beyond that depends on the individual goals and aspirations. Here, if the goal is to try to jump social strata and be uber rich, a fully diversified portfolio may not be the way to goal when you do not have resources and time. If that's the ambition then going all in with the remaining money on one or few select investment is a valid strategy. Just be sure to have that safety net first.

 

[Momus]

Real estate has 2 characteristic: fixed income (long term leases) and equity like (short term leases, and vacancy rate). Due to equity and bond like characteristic, one would assume it will generate return in between bond and stock return. From 1978-2003, stocks got 13.5%, REITS 12%, intermediate bonds 8.7% annualy. It's right in the middle. It will never beat stocks in the long run.

If you want long term return, you go with stocks. Stocks has equity risk premium. This equity risk premium has to exist. Risk premium must exist for capital markets to function effectively. Right now, REITS out performs bonds and stock because it's the single primary benefits of housing bubble. As more people choose to rent apartments, and long leases of commercial properties. But over the long term, stocks can't be beat. Jeremy Siegel's 200 years of data shows US stocks earned 8.3%/year. Roger Ibboston's 78 years of data shows stocks earned 10.4%/year. No other asset class possess such an impressive record of long term performance.

I do I vouch for diversification nonetheless. In 1929, it took stocks investors 21 years and 3 months to match returns generated by bond investors. It will take at least 10 years for someone who bought a house in 2006 to get back all money. It pays to stay diversified.

Although with all this evidence, it still boggles me that my mom bought a rural piece of land abroad for $2000 in the 80s and now it's worth $1.5M (anomaly of course) >_>; got a jack pot because there are a lot of developers building roads and housing in the surrounding area.

 

[Old Timer]

Just remember if you want to look at a home solely as an investment, make sure you deduct the cost of housing from your stock/bond whatever investment. You get housing for you and your family as well as appreciation, over the long term that is. I bought my house in 86 for 150K it's now worth 340K. Plus it gave me a place to live and it financed my daughters college education.

There are a great many things to consider. For example, do you plan on living there for the life of the loan? You have to factor that in. When I was looking at a refi and keeping the term as it is or going to a new 30 year, you also have to look at the difference in payment and what would all of that money be worth at the end of the likely time you would sell.....

 

[xiphoid2010]

CNN article on housing market. http://finance.fortune.cnn.com/2012/07/27/homebuilder-stock-rally/

Now key is not to do the herd mentality. Places that were once shopping sprees are likely too late to cash in on when the news breaks. But a range of low to moderate properties in other areas are likely still attractive given the low interest rates. The type of property will matter. A multi-unit buildeing around a university or growing economic center will be safer than a single house where a single vacancy can cost you big.

If you are gutsy, you can risk Chinese realestate, but let me warn you, when my parents risked it in 2001, it made their guts churn, but they made it out like bandits; when they chose not to invest due to what they thought were a bubble in 2006, they missed out on doubling their money. Now in 2012, the risk is higher. You will still likely make money in the long term Chinese growth, but the risk of short term loses is large, especially if you don't have a relative/insider who is on site to give you guidance.

 

[pezdispenser]

QE3 appears to be kicking in and mortgage rates are coming down some more. 30 year fixed in the low 3% plus you get the mortgage interest tax deduction. Inflation also around 3%. This is practically free money. Is anyone not buying a house, and if so, what more incentive would you need?

 

[Momus]

QE3 appears to be kicking in and mortgage rates are coming down some more. 30 year fixed in the low 3% plus you get the mortgage interest tax deduction. Inflation also around 3%. This is practically free money. Is anyone not buying a house, and if so, what more incentive would you need?

It becomes a seller market. Inventory seems to be down 50% from last year. The best time to buy was January 2012. Now, you get multiple bids with price up 10-30%. There is no big bargain with desperate sellers who want to unload fast and take a loss anymore. Plus, the house I am eyeing for is ~$800k in one of the best neighboorhood -.-;

 

[Pharmacy Kid]

I'm thinking of buying a house. Here are some rates from USAA. I'm thinking of going for the 15 year because it has a lower APR and the monthly payment is only $300 more. What you all think?




30-Year Fixed Rate
Estimated Monthly Payment: $902.18
Interest Rate 3.375%
APR 3.795%
Loan Amount $142,500
Points/Cost 1.125 / $1,603
Settlement Costs $12,824.95
Minimum Down Payment $7,500.00
Cash Due at Closing $12,474.96

Show Details



15-Year Fixed Rate

Estimated Monthly Payment $1,218.90
Interest Rate 2.625%
APR 3.041%
Loan Amount $142,500
Points/Cost 1.000 / $1,425
Settlement Costs $12,637.91
Minimum Down Payment $7,500.00
Cash Due at Closing $12,287.92

 

[N974]

In my late 30s, bought and sold many properties, and own a few rentals.....regardless of the temptation to "invest" the difference between a 15 and 30 yr, tax write off, etc....I say go with the 15 year.....5 years will pass before you know it and you will have a huge chunk already paid off, close to 50% with your original down payment. I still own my second property as a rental I bought 10 years ago, it blows my mind that it would be close to being paid off if I had originally had a 15 yr....a home now worth about 260k. Even with the higher 15 yr payment, I would be now be positive $200 a month in cash flow, plus $800 in principle being paid off by the renters every month.

 

[Temperature101]

serious question: would anyone ever save 300k and then buy a house cash? If not, why?

I would personally if I had three times of that amount...I bought one for 150K about a year ago in Florida putting 20% down payment , and I will try to pay it off in 5 years... You take a lot stress off your shoulder when you are mortgage free.

 

[Temperature101]

I'm thinking of buying a house. Here are some rates from USAA. I'm thinking of going for the 15 year because it has a lower APR and the monthly payment is only $300 more. What you all think?




30-Year Fixed Rate
Estimated Monthly Payment: $902.18
Interest Rate 3.375%
APR 3.795%
Loan Amount $142,500
Points/Cost 1.125 / $1,603
Settlement Costs $12,824.95
Minimum Down Payment $7,500.00
Cash Due at Closing $12,474.96

Show Details



15-Year Fixed Rate

Estimated Monthly Payment $1,218.90
Interest Rate 2.625%
APR 3.041%
Loan Amount $142,500
Points/Cost 1.000 / $1,425
Settlement Costs $12,637.91
Minimum Down Payment $7,500.00
Cash Due at Closing $12,287.92

15-year make more sense...You paid less interest and your mortgage will be paid off before you even realize it...I bought a year ago for 150k putting 20% down and my outstanding balance is already 100K ( I send extra money when I can) and I sitting in 80k equity now since the house appreciate a bit in the last few months... I want pay it off in another 4 years so I can be mortgage free in my late 30s, which I think is a good thing.

 

[Momus]

Locked in 3.125% no point for 30 year fixed today with $1179 rebate, plus Realtor/Redfin rebate $5000. Great rate XD