usctrojancpa
Well-known member
bones said:
US Bank has 2.75% 7/1 ARM with about $1k in fees. These ARM rates just do not want to go down much. It'll be interesting how long they stay stubborn if rates continue to bleed lower.
How low can we go? 30 yr fixed at 3.75% with no fees...
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US Bank has 2.75% 7/1 ARM with about $1k in fees. These ARM rates just do not want to go down much. It'll be interesting how long they stay stubborn if rates continue to bleed lower.
We are in an inverted yield curve rate environment so this is expected.
It won't be inverted for every long when the Fed cuts again in 2 weeks. The 10-year bond just hit 0.83% in after hours. Wow, we are heading to 0.50% on the 10-year bond fast.
That is also one of the caveats with ARMs. When fixed rates are so low, the usefulness of an ARM is diminished and that's the time when you should consider locking into a fixed. It's when rates are higher, that ARMs become a better choice (for those who are comfortable with ARMs).
As long as you don't do a cash-out refi, you are still grandfathered into the $1m mortgage deduction.
Here is what I tell my clients...
If you get a 10-year ARM loan, it needs to have an interest rate AT LEAST 3/8% lower than the 30-year fixed interest rate to be paid for the additional risk you absorb. If you get a 7-year ARM loan, it needs to have an interest rate AT LEAST 1/2% lower than the 30-year fixed loan interest rate to be paid for the additional risk you absorb.
I would love to borrow at 0.5% for 10 years. Heck, I will even pay full 1.00% if investors think I am higher risk than Govt.
Crazy times. Shouldn't US just issue heck lot of bonds, borrow dirt cheap money and modernize everything in the country - roads, bridges, airports...?
I only listen to myself except when I listened to TI and refinanced and even that turned out pretty well. I?ve been buying over the last week and have plenty more to deploy over the next 2-3 weeks. I still think this is temporary and all will be fine soon. Hell I may even buy some oil at this point.
US Bank has 2.75% 7/1 ARM with about $1k in fees. These ARM rates just do not want to go down much. It'll be interesting how long they stay stubborn if rates continue to bleed lower.
woodburyowner
Well-known member
USCTrojanCPA said:
We are in an inverted yield curve rate environment so this is expected.
usctrojancpa
Well-known member
woodburyowner said:
It won't be inverted for every long when the Fed cuts again in 2 weeks. The 10-year bond just hit 0.83% in after hours. Wow, we are heading to 0.50% on the 10-year bond fast.
Irvinehomeseeker
Active member
I just refi with cashcall on feb 21 but with rates dropping, i may consider refi again! Will wait for a few more days as i haven't made my first payment yet.
sgip
Well-known member
For those in IrvineHomeSeekers position - some considerations.....
If you refinance at 3.0 and rates drop to 1.999, there isn't a big barrier to refinancing again. Some companies will only refinance a loan that has had 2-3 payments made, so you have to be very careful when shopping around and ask this question first - "What are your seasoning requirements?"
So after some calling around you've found a new lender ready, willing, and able to deliver the 1.999 rate. I'd recommend giving (in this case) Cashcall a heads up before committing to the new lender.
Why? A customers refinance a $200,000 loan at 3.0% with a $2,000 credit for closing fees, is actually a 3.00% with about $10,000 that the lender earns by making the loan and reselling it. You got $2,000 and Cashcall got $8,000. If this loan is refinanced, Cashcall must pay back the $10,000 and perhaps another $5,000 for an early payoff penalty. Multiply that by 100 loans per month, and you can see the problem Cashcall, Quicken, LenderFi, Owning, and all of the other brokers are facing. The larger the loan - the higher the penalty. This is a $200,000 loan. What happens with a $500,000 or $700,000 loan. Pain... that's what happens. P. A. I. N.
Should you care about this? In some ways, yes, but that's another discussion. Going back to the "why" question - Since Cashcall is facing several hundreds of thousands of early payoff penalties, they are more than eager to help you into a new loan. It might not be 1.999%, but you also don't have to go through the process again. The Loan Officer at CashCall (substitute any lender's name, as it's a universal issue....) might say you cannot refinance, or there's a penalty of some sort - but this is not the case. If that pushback is offered, A) Ask for a manager, or B) Let the new lender proceed. You've done what was right in this case and got pushback. Move on.
My .02c
If you refinance at 3.0 and rates drop to 1.999, there isn't a big barrier to refinancing again. Some companies will only refinance a loan that has had 2-3 payments made, so you have to be very careful when shopping around and ask this question first - "What are your seasoning requirements?"
So after some calling around you've found a new lender ready, willing, and able to deliver the 1.999 rate. I'd recommend giving (in this case) Cashcall a heads up before committing to the new lender.
Why? A customers refinance a $200,000 loan at 3.0% with a $2,000 credit for closing fees, is actually a 3.00% with about $10,000 that the lender earns by making the loan and reselling it. You got $2,000 and Cashcall got $8,000. If this loan is refinanced, Cashcall must pay back the $10,000 and perhaps another $5,000 for an early payoff penalty. Multiply that by 100 loans per month, and you can see the problem Cashcall, Quicken, LenderFi, Owning, and all of the other brokers are facing. The larger the loan - the higher the penalty. This is a $200,000 loan. What happens with a $500,000 or $700,000 loan. Pain... that's what happens. P. A. I. N.
Should you care about this? In some ways, yes, but that's another discussion. Going back to the "why" question - Since Cashcall is facing several hundreds of thousands of early payoff penalties, they are more than eager to help you into a new loan. It might not be 1.999%, but you also don't have to go through the process again. The Loan Officer at CashCall (substitute any lender's name, as it's a universal issue....) might say you cannot refinance, or there's a penalty of some sort - but this is not the case. If that pushback is offered, A) Ask for a manager, or B) Let the new lender proceed. You've done what was right in this case and got pushback. Move on.
My .02c
irvinehomeowner
Well-known member
USCTrojanCPA said:
That is also one of the caveats with ARMs. When fixed rates are so low, the usefulness of an ARM is diminished and that's the time when you should consider locking into a fixed. It's when rates are higher, that ARMs become a better choice (for those who are comfortable with ARMs).
irvinehomeowner
Well-known member
So someone asked me this, and it may have been asked here already... but I don't think it does... as long as you bought your house before 12/15/17, a refi doesn't trigger the mortgage interest deduction limit right?
sgip
Well-known member
@Irvinehomeowner - seems like a USCTPA question to solve! This shouldn't be answered by anyone unless they have a deep background in tax law.
@Dethman Regarding 3.5 and refinancing - Ask your tax person if your loan is over $750k. Also, Ask yourself: "Do you want to pay off your loan or just lower the rate because it's never going to pay off?" This helps define how any new loan will be structured for your personal benefit. In an earlier post, it's also helpful to know if you plan on buying another home. That sweet, sweet 2.x 15 year loan rate will sure be nice to have, but it can fark up your ability to purchase a new home if you aren't keeping an eye out on debt to income ratios first.
@Mety - Some lenders will ask only for 1 year W-2. It's all dependent upon your Automated Underwriting System Results (AUS). If the AUS run says 1 year, you're good. If the AUS says 2 years, an Underwriter will want to know why your income has fallen. If it's because of an illness, or time off for taking care of some one - no biggie. If your income was reduced because of bonus payments, that's separate from your base pay. Bonus income won't be averaged in this situation. If it's for another reason, some Underwriters will use only your 2019 reported income not on an average basis, but as an expected income for 2020. If you still qualify using 2019 income, again, no biggie.
My .02c
@Dethman Regarding 3.5 and refinancing - Ask your tax person if your loan is over $750k. Also, Ask yourself: "Do you want to pay off your loan or just lower the rate because it's never going to pay off?" This helps define how any new loan will be structured for your personal benefit. In an earlier post, it's also helpful to know if you plan on buying another home. That sweet, sweet 2.x 15 year loan rate will sure be nice to have, but it can fark up your ability to purchase a new home if you aren't keeping an eye out on debt to income ratios first.
@Mety - Some lenders will ask only for 1 year W-2. It's all dependent upon your Automated Underwriting System Results (AUS). If the AUS run says 1 year, you're good. If the AUS says 2 years, an Underwriter will want to know why your income has fallen. If it's because of an illness, or time off for taking care of some one - no biggie. If your income was reduced because of bonus payments, that's separate from your base pay. Bonus income won't be averaged in this situation. If it's for another reason, some Underwriters will use only your 2019 reported income not on an average basis, but as an expected income for 2020. If you still qualify using 2019 income, again, no biggie.
My .02c
usctrojancpa
Well-known member
irvinehomeowner said:
As long as you don't do a cash-out refi, you are still grandfathered into the $1m mortgage deduction.
usctrojancpa
Well-known member
irvinehomeowner said:
Here is what I tell my clients...
If you get a 10-year ARM loan, it needs to have an interest rate AT LEAST 3/8% lower than the 30-year fixed interest rate to be paid for the additional risk you absorb. If you get a 7-year ARM loan, it needs to have an interest rate AT LEAST 1/2% lower than the 30-year fixed loan interest rate to be paid for the additional risk you absorb.
Cornflakes
Active member
USCTrojanCPA said:
I would love to borrow at 0.5% for 10 years. Heck, I will even pay full 1.00% if investors think I am higher risk than Govt.
Crazy times. Shouldn't US just issue heck lot of bonds, borrow dirt cheap money and modernize everything in the country - roads, bridges, airports...?
qwerty
Well-known member
eyephone said:
I only listen to myself except when I listened to TI and refinanced and even that turned out pretty well. I?ve been buying over the last week and have plenty more to deploy over the next 2-3 weeks. I still think this is temporary and all will be fine soon. Hell I may even buy some oil at this point.