It's time to refi

Ron-P

We are in the process of closing out our HELOC and converting it into a fixed rate mortgage. Our HELOC had a variable rate and with this economy being both good and bad I thought it a good idea to get something with a fixed rate. Just locked the rate in today at 4.5% for 30 years. Not too bad and no more worries about interest rates going up.

cstmar01

thats not a bad rate at all seeing prime is still at like 3.75% I believe. Nice deal!

hearingimpared

I have a fixed 5% 30 year rate going on five years now. We had a mortgage company offer us 4.65% but after they crunched the numbers with the cost of switching to their company it turned out to be a wash in the end. My biggest problem is paying the FHA 80% of home worth insurance each month. It would have ended this November but because of the housing market decline, my house value has declined thus it may take two more years to get to the 80% cut off. However with the decline of the value came the decline of real estate taxes which now are less than $700 per year. Delaware is a great state to live in for low taxes.

George Grand

Mortgage. Mortgage? I believe I had one of those once.

NotaSuv

hearingimpared wrote: »

I have a fixed 5% 30 year rate going on five years now. We had a mortgage company offer us 4.65% but after they crunched the numbers with the cost of switching to their company it turned out to be a wash in the end. My biggest problem is paying the FHA 80% of home worth insurance each month. It would have ended this November but because of the housing market decline, my house value has declined thus it may take two more years to get to the 80% cut off. However with the decline of the value came the decline of real estate taxes which now are less than $700 per year. Delaware is a great state to live in for low taxes.

Is that less than $700 for the entire year?

That itself would save me over 3k a year....and I'm on the low end of the taxe scale here

shack

cstmar01 wrote:

thats not a bad rate at all seeing prime is still at like 3.75% I believe. Nice deal!

Prime is 3.25% and has nothing to do with mortgage rates. Mortgage rates correlate more closely to the bond and long term treasury markets. We have seen periods of time of an inverted yield curve where prime rate was significantly higher than long term mortgage rates (not too long ago actually).

And yes...4.50% is a very nice rate. NOW is the time to refi...if you can. Once the economy really starts recovering we should see significant inflation...and THAT will have an effect on mortgage rates. As the government has to pay higher rates to finance the HUGE debt we have it will drive up mortgage rates because investors will demand a premium to invest in mortgages. So don't wait...do it now!

hearingimpared

NotaSuv wrote: »

Is that less than $700 for the entire year?

That itself would save me over 3k a year....and I'm on the low end of the taxe scale here

Yes sir.

coolsax

just something to keep in mind. I'm in the mortgage industry and see this quite a bit.. If you are at that 5% mark.. even 4.5% might not be worth the hassle and cost of doing the refi unless you are getting credit towards closing costs or know you aren't going to leave the home for at least 10 years. So many people think oh lower rate awesome without taking into account the long term ramifications of refinancing, since it resets your term if you are sticking with the same term and many times you are having to pay closing costs which may or may not be rolled into the loan.

However if you are purchasing a home and can get 4.5 jump on it while you can, Shacks right in that rates will go up, the government is slowing down its purchasing of Bonds (whose rates mortgages are more based off of, and which has helped kept rates at or below 5% for the last year), as the govt slows down its purchases and the economy recovers mortgage rates will gradually increase over time.

hearingimpared

coolsax wrote: »

just something to keep in mind. I'm in the mortgage industry and see this quite a bit.. If you are at that 5% mark.. even 4.5% might not be worth the hassle and cost of doing the refi unless you are getting credit towards closing costs or know you aren't going to leave the home for at least 10 years. So many people think oh lower rate awesome without taking into account the long term ramifications of refinancing, since it resets your term if you are sticking with the same term and many times you are having to pay closing costs which may or may not be rolled into the loan.

The closing costs and the costs of doing the refi is why we didn't take the offer as it was a wash in the end.

shack

coolsax wrote:

Shacks right in that rates will go up, the government is slowing down its purchasing of Bonds (whose rates mortgages are more based off of, and which has helped kept rates at or below 5% for the last year), as the govt slows down its purchases and the economy recovers mortgage rates will gradually increase over time.

The only thing I disagree with is "gradually". I think once inflation starts to rear it's ugly head...it will happen quickly. I don't know how long you've been in the mortgage business...but I was there to witness the 18-20% mortgage rates of the late 70s and early 80's. Rates were moving daily and no one was willing to lock in a rate for more than a few days. While the rates may not go that high because the starting point is lower...I could see them doubling. Again, this is JMO and I hope for the economy it doesn't happen. I'm just not sure the mechanisms are in place (or the govt has the stomach) to prevent the inflationary pressures that are sure to come. Time will tell.

hearingimpared

I remember back in the early '80s getting a mortagage rate of over 13% and thought I was doing very well at the time. Now mine's at 5% fixed. I'm not moving.

wayne3burk

Last year we refi'd from 6% down to 4 and 3/8s (4.3875). Refinancing charges were about $4,500 (which they rolled back into the loan). We refinanced for 9,000 over and our payments went down about $350 a month.

The down side if there is one is that our mortgage went back up from 24 yrs to 30 yrs.

A good amortization calculator will help you figure out a balance point to show what kind of payment you'd need to make to actually pay off your mortgage on it's original schedule. If you're interested in keeping your payoff date the same, you'd still probably save money on a month to month basis if you're original rate is at least 1.5 percent higher than your refi rate.

.. wayne ..

p.s. -- it's always a good idea to make one extra mortgage payment a year -- it goes direct to principal and none to interest and it will reduce a 30 yr mortgage to about 24 or 26 yrs... something along that order. ask your mortgage servicer to make your payments twice monthly instead of monthly -- you end up with 26 payments i.e, one extra payment a year.

shack

hearingimpared wrote:

I remember back in the early '80s getting a mortagage rate of over 13% and thought I was doing very well at the time. Now mine's at 5% fixed. I'm not moving.

That was on the downside of the mortgage rates. I remember when they finally got below the double digit mark...people thought nirvana was at hand.

Ron-P

wayne3burk wrote: »

Last year we refi'd from 6% down to 4 and 3/8s (4.3875). Refinancing charges were about $4,500 (which they rolled back into the loan). We refinanced for 9,000 over and our payments went down about $350 a month.

The down side if there is one is that our mortgage went back up from 24 yrs to 30 yrs.

A good amortization calculator will help you figure out a balance point to show what kind of payment you'd need to make to actually pay off your mortgage on it's original schedule. If you're interested in keeping your payoff date the same, you'd still probably save money on a month to month basis if you're original rate is at least 1.5 percent higher than your refi rate.

.. wayne ..

p.s. -- it's always a good idea to make one extra mortgage payment a year -- it goes direct to principal and none to interest and it will reduce a 30 yr mortgage to about 24 or 26 yrs... something along that order. ask your mortgage servicer to make your payments twice monthly instead of monthly -- you end up with 26 payments i.e, one extra payment a year.

All good info Wayne.

I could have payed points to drop the rate lower, down to 4.375% but it was not worth it using the calculators. We crunched a lot of numbers and found what was best and while I could have done a bit better if I hunted harder I am very happy with 4.5%.

I guess technically this is not a refi being that we did not have a mortgage, just the HELOC. But, like you stated paying towards the principal makes a huge impact on the life of the loan. That's how we paid it off the first time.

cstmar01

shack wrote: »

Prime is 3.25% and has nothing to do with mortgage rates. Mortgage rates correlate more closely to the bond and long term treasury markets. We have seen periods of time of an inverted yield curve where prime rate was significantly higher than long term mortgage rates (not too long ago actually).

And yes...4.50% is a very nice rate. NOW is the time to refi...if you can. Once the economy really starts recovering we should see significant inflation...and THAT will have an effect on mortgage rates. As the government has to pay higher rates to finance the HUGE debt we have it will drive up mortgage rates because investors will demand a premium to invest in mortgages. So don't wait...do it now!

Sorry that I said 3.75 not 3.25 and yes it does have to do with rates that he was talking about.
"We are in the process of closing out our HELOC and converting it into a fixed rate mortgage"

A HELOC also known as a Home equity line of credit normally does have a factor of the prime rate into it. I am not talking about 1st mtgs that are FHA, FNMA, VA, ect.
HELOCS at least at the banks I've encountered, do have to play with prime, such as your rate will be prime (3.25) + a certain % such as 1. This would make your rate 4.25 during that month and typically prime can change all the time but normally ( at least our bank) takes the prime rate that is published the 2nd tuesday of the month. Using prime + % is a good way right now to get a loan as it will normally be very low and then people will just take out equity in their home to buy a car, or make repairs ect ect. however some banks (like ours) puts a floor rate on the prime +%. even though it would be 4.25 the note will state the customer's rate will always be AT LEAST 5.00% as that is the floor rate. Some people and banks offer lock ins that the cust can do. for us its like 15 year lock in at 6.25%. this would then amortize (Spelling I'm terrible at) the balance of the loan that the customer would choose over those 15 years ect. otherwise for us, the customer is just paying interest (prime +%) on the loan balance, sooo if you have say 20K on a HELOC and your rate is at floor (5%) your paying about 84 bucks a month. Cheaper than a CC however you never pay off the true balance of anything.

if he was doing a 4.5 rate with a fixed mtg program such as FHA ect or one that will be sold on the secondary market to say FNMA then 4.5 is a good rate as well and no prime does not factor into those. If you would take out a fixed home equity loan then yes prime would factor into those. Seeing he stated he was refi a HELOC that would mean to me, a fixed home equity loan and that (at our bank and others) plays off of prime.

hearingimpared

wayne3burk wrote: »

Last year we refi'd from 6% down to 4 and 3/8s (4.3875). Refinancing charges were about $4,500 (which they rolled back into the loan). We refinanced for 9,000 over and our payments went down about $350 a month.

The down side if there is one is that our mortgage went back up from 24 yrs to 30 yrs.

A good amortization calculator will help you figure out a balance point to show what kind of payment you'd need to make to actually pay off your mortgage on it's original schedule. If you're interested in keeping your payoff date the same, you'd still probably save money on a month to month basis if you're original rate is at least 1.5 percent higher than your refi rate.

.. wayne ..

p.s. -- it's always a good idea to make one extra mortgage payment a year -- it goes direct to principal and none to interest and it will reduce a 30 yr mortgage to about 24 or 26 yrs... something along that order. ask your mortgage servicer to make your payments twice monthly instead of monthly -- you end up with 26 payments i.e, one extra payment a year.

We made a practice at making two extra mortgage payments a year making it clear to the mortgage company that it was to go to the prinicipal but with the economy being what it's been the last two years and us being on fixed incomes it has become damn near impossible to make one a year right now but we hope to start this practice again as it does reduce the amount of years your mortgage lasts.

shack

cstmar01 wrote: »

Sorry that I said 3.75 not 3.25 and yes it does have to do with rates that he was talking about.
"We are in the process of closing out our HELOC and converting it into a fixed rate mortgage"

A HELOC also known as a Home equity line of credit normally does have a factor of the prime rate into it. I am not talking about 1st mtgs that are FHA, FNMA, VA, ect.
HELOCS at least at the banks I've encountered, do have to play with prime, such as your rate will be prime (3.25) + a certain % such as 1. This would make your rate 4.25 during that month and typically prime can change all the time but normally ( at least our bank) takes the prime rate that is published the 2nd tuesday of the month. Using prime + % is a good way right now to get a loan as it will normally be very low and then people will just take out equity in their home to buy a car, or make repairs ect ect. however some banks (like ours) puts a floor rate on the prime +%. even though it would be 4.25 the note will state the customer's rate will always be AT LEAST 5.00% as that is the floor rate. Some people and banks offer lock ins that the cust can do. for us its like 15 year lock in at 6.25%. this would then amortize (Spelling I'm terrible at) the balance of the loan that the customer would choose over those 15 years ect. otherwise for us, the customer is just paying interest (prime +%) on the loan balance, sooo if you have say 20K on a HELOC and your rate is at floor (5%) your paying about 84 bucks a month. Cheaper than a CC however you never pay off the true balance of anything.

if he was doing a 4.5 rate with a fixed mtg program such as FHA ect or one that will be sold on the secondary market to say FNMA then 4.5 is a good rate as well and no prime does not factor into those. If you would take out a fixed home equity loan then yes prime would factor into those. Seeing he stated he was refi a HELOC that would mean to me, a fixed home equity loan and that (at our bank and others) plays off of prime.

Gee...thanks for the education. I've only been in banking for 32 years. You've really enlightend me. :rolleyes:

I know EXACTLY what he was referring to and prime has nothing to do with his new rate...which was my point.

thuffman03

Now is the time to do it. Everything I have read is that rates will start to increase as the year progresses. TARP will no longer be available and banks will start to have to pay TARP back so cost of doing business will increase and so will the rates.

coolsax

shack wrote: »

The only thing I disagree with is "gradually". I think once inflation starts to rear it's ugly head...it will happen quickly. I don't know how long you've been in the mortgage business...but I was there to witness the 18-20% mortgage rates of the late 70s and early 80's. Rates were moving daily and no one was willing to lock in a rate for more than a few days. While the rates may not go that high because the starting point is lower...I could see them doubling. Again, this is JMO and I hope for the economy it doesn't happen. I'm just not sure the mechanisms are in place (or the govt has the stomach) to prevent the inflationary pressures that are sure to come. Time will tell.

I understand what your saying, I've only been in the industry for 7 years so I missed out on a lot of those really high rates, but I have a degree in economics so I try to keep up with what's going on economic wise.. I was more referring on the gradually as a short term thing (ie through end of year maybe begining of next year).. no idea what its going to do long term (I don't think anyone does) . You're right if Inflation decides to get bad we could definitely see some 8-10 rates, but I personally don't see that happening this year or even early next year b/c the fed is really trying to keep those pressures down, but if it gets out of the feds control, who knows where they'll end up, that's the one thing about economics, if one thing gets out of whack you can have a nice domino effect all the way down the line.

shack

thuffman03 wrote:

TARP will no longer be available and banks will start to have to pay TARP back so cost of doing business will increase and so will the rates.

TARP has next to nothing to do with mortgage rates.

PhantomOG

wayne3burk wrote: »

p.s. -- it's always a good idea to make one extra mortgage payment a year -- it goes direct to principal and none to interest and it will reduce a 30 yr mortgage to about 24 or 26 yrs... something along that order. ask your mortgage servicer to make your payments twice monthly instead of monthly -- you end up with 26 payments i.e, one extra payment a year.

Most mortgage places offer the bi-monthly thing, but they charge you a fee. Kinda defeats the purpose in my opinion. You can make principal payments anytime you want without a fee.

shack

coolsax wrote:

I understand what your saying, I've only been in the industry for 7 years so I missed out on a lot of those really high rates, but I have a degree in economics so I try to keep up with what's going on economic wise.. I was more referring on the gradually as a short term thing (ie through end of year maybe begining of next year).. no idea what its going to do long term (I don't think anyone does) . You're right if Inflation decides to get bad we could definitely see some 8-10 rates, but I personally don't see that happening this year or even early next year b/c the fed is really trying to keep those pressures down, but if it gets out of the feds control, who knows where they'll end up, that's the one thing about economics, if one thing gets out of whack you can have a nice domino effect all the way down the line.

My degree was in finance, but I had a minor in econ. I see what you are saying. I think through the end of the year things will be pretty flat with a few ups and downs. I just think when inflations starts...it will move upward fast. The other key issue other than the bond markets is demand. If home mortgage demand remains flat...mortgage loan rates won't move much. If demand starts to pick up, the classic supply/demand formula will take hold. There are just not many lenders/investors willing to commit to mortgage financing...too many have been burned and the pool of funds available for mortgage financing will be slow to re-materialize. Guess who may have to make up the difference....the govt. Where will they get the funds? Issue more debt. That's going to drive rates up. Only when rates get high enough will private money start moving back into the market in substantial amounts...and even that may be problematic.

coolsax

yeah, I'm just not sure how much that demand is going to increase.. definitely not in the short term I think, and if the economy continues to struggle and we continue to have stated unemployment at around 10%, which of course is not even the true number b/c it doesn't count underemployed and people who have just given up, then that demand is going to stay low b/c a lot of people just won't be able to afford to get into a house.
With so many people unable or unwilling to stay in their homes that with a foreclosure an bankruptcy on their Credit its going to keep them out of the demand pool for 3-5 years as well unless mortgage lenders open up their underwriting standards again, which I'm not sure is a smart idea anyway b/c that's part of what got us into this mess to begin with.

madmax

Ron-P wrote: »

We are in the process of closing out our HELOC and converting it into a fixed rate mortgage. Our HELOC had a variable rate and with this economy being both good and bad I thought it a good idea to get something with a fixed rate. Just locked the rate in today at 4.5% for 30 years. Not too bad and no more worries about interest rates going up.

I was thinking you paid off the mortgage for some reason. Maybe it was just credit cards or something. Congrats on the great rate!
madmax

bsoko2

My wife and I are in our mid 60's and still have a big mortgage due to illness and other things beyond our control. We owed 192K on the house and really can't see moving or changing where we live until we pass on. Took out a reverse mortgage and pocketed a good sum with the new mortgage. No payments for life, mine and hers (we both get to keep living in the house when one passes on) and we can sell whenever we want. No payment until I'm 100!

Bill

cstmar01

shack wrote: »

Gee...thanks for the education. I've only been in banking for 32 years. You've really enlightend me. :rolleyes:

I know EXACTLY what he was referring to and prime has nothing to do with his new rate...which was my point.

Well I was just going off the information that was provided by the OP. I can not tell by the info provided what kind of mortgage he was obtaining. I am sorry if you feel I insulted your intellegence but I was merely showing where I am coming from in regards to my thought on the issue, if you really don't like it then fine, but I am not trying to be insulting, nor confrontational.

I can not from the context conclude what the OP was trying to say he was getting for a new mtg, your thought takes you a different way than me, so be it. I do not feel either of us were wrong but please don't say that I'm totally wrong because he did not say ANYWHERE it was a conventional bank owned ect that would not deal with prime. If you know exactly what it was then fine, I did not.

and this is why I thought that yes prime would be a factor
"Just locked the rate in today at 4.5% for 30 years."

if you "lock in" a rate that means its normally not a "fixed rate mortgage" and thus not the kind you are talking about (and would deal with prime).:D if you have other information or know what the OP got personally then fine, you have more info than I have.

and there is no way for me to know you're in banking, sorry, but most people don't know how things work, or for that matter even know what their balance is. I just went into detail to my thought, if you don't like it then fine you don't but I'm not going to argue with you, that was my thought process and if you would like the OP to post what he really got for a product to see whos right then fine. I can admit I could be wrong but I'm just going by the info I have.

kingtut

Pay extra toward principal vs. put the extra payment toward a Roth IRA.
Most so-called "experts" recommended putting extra payment toward the Roth IRA. I'm debating which course to take. George Grand and Coolsax, since you both are in the mortg/banking industry, what do you Gentlemen think?

shack

cstmar01 wrote:

and this is why I thought that yes prime would be a factor
"Just locked the rate in today at 4.5% for 30 years."

if you "lock in" a rate that means its normally not a "fixed rate mortgage" and thus not the kind you are talking about (and would deal with prime).:D if you have other information or know what the OP got personally then fine, you have more info than I have.

"Locked in" is the most basic of terms in mortgage lending. It means exactly what it says...the rate is locked (fixed) for 30 years.

There are only two types of rates...fixed or variable.

I don't need to know the OP personally as it is extremely clear what type of loan he has.

coolsax

I have heard the Roth IRA argument before, but I honestly don't know which way i would advise, I'm mostly knowledgeable in Mortgage and Real Estate aspect, and not much in Financial planning. Personally I'm currently paying a little more than an extra payment a year myself, but this is b/c I'd like to have as much equity in the house as i can b/c I don't plan on staying here for more than 7-10 years so that equity will be useful when buying up to a new home. I think you probably need to talk to a financial planner who has your interests at heart and hopefully not one that is just looking for his commision..

I know for tax purposes paying off quicker is not always the best option but our interest is so low that we would likely only itemize out our deductions every other year anyway depending upon charity contributions, car purchases and real estate taxes.

cstmar01

shack wrote: »

"Locked in" is the most basic of terms in mortgage lending. It means exactly what it says...the rate is locked (fixed) for 30 years.

There are only two types of rates...fixed or variable.

I don't need to know the OP personally as it is extremely clear what type of loan he has.

to explain in regards to my bank a little better.
For us we have two different home equity type products. HELOC and the equity loans. Now with a HELOC it is variable unless someone "locks in" the rate. for example you have 20K in debt we offer the lock in of 6.25% for 15 years. Even though it still is considered a variable rate product your fixing your rate for those # of years. (and the 20K of debt is paid off in the same amount of time. For us you can cancel the lock in by just paying a fee and it will go back to interest only pymts and the variable rate) The same with the home equity loans. You can take the loan out to be say 6.5% for the 1st 5 years then it would become variable after that. OR you can "lock in the rate" in our terms and amortize it for 30 years ect.
Thats what I think of doing a lock in, and I am sorry for the confusion on my part or lack of explaining what I ment.

Fixed rate we associate with normal 1st mtgs that would like FHA, or ones that we would sell on the secondary market ect.

Thats just were I am coming from with how we work.

coolsax

shack wrote: »

"Locked in" is the most basic of terms in mortgage lending. It means exactly what it says...the rate is locked (fixed) for 30 years.

There are only two types of rates...fixed or variable.

I don't need to know the OP personally as it is extremely clear what type of loan he has.

when it comes to locking its not necessarilly a fixed rate either.. when you lock, you're locking your initial rate, which could be fixed or could be variable down the line. your loan officer or broker should be upfront with you on the type of rate you locked into whether it be fixed rate or variable.

when the mortgage mess was at its highest I saw plently of locks at 1.99% for the initial rate,(pay option arms, ugly ugly loans that should have never seen the light of day) but then when the variable rate kicked in it could of course get much higher. which is a big part of our current messes. People were qualified at the initial rate instead of more conservative avg rate.