How low can we go? 30 yr fixed at 3.75% with no fees...

[usctrojancpa]

So Morgan Stanley emailed back, it is for jumbo loans only, margin is 1.875% (1.75 for <60%LTV, FICO>740), a no cost refi with enough credits to cover closing costs will increase rates to 2.25%.  No impounds.

Alyson also has an IO product, details to come.

Can you forward me the MS contact info name? 

 

[rkp]

Crazy question.  Some of the refinance credits are $10K+.  Right now on Amerisave, each product has a $9K credit.  Assuming the costs of refi are around $3K, what is stopping someone from refi'ing every 60 days for a year and pocketing close to $36K if not more at the end of the year.  Sure the clock gets reset every time but what other costs or factors would stop someone from doing this?  From SGIPs note about having to show a benefit, you can start with 30y then move to 15y and then to 7/1 and then to 5/1.  That is 4 refinances that would all show a benefit assuming rates stay flat.

 

[woodburyowner]

Crazy question.  Some of the refinance credits are $10K+.  Right now on Amerisave, each product has a $9K credit.  Assuming the costs of refi are around $3K, what is stopping someone from refi'ing every 60 days for a year and pocketing close to $36K if not more at the end of the year.  Sure the clock gets reset every time but what other costs or factors would stop someone from doing this?  From SGIPs note about having to show a benefit, you can start with 30y then move to 15y and then to 7/1 and then to 5/1.  That is 4 refinances that would all show a benefit assuming rates stay flat.

I believe there is a max credit you can close with - 1% or something?  I did the exact scenario you are describing a few years ago when rates were hitting new lows over the course of 6-9 months.  Took about 2 hours of paperwork and doc signing for each refi, but I made out quite nicely.  I don't think I'll ever be able to get that return per hour ever in my life again!

 

[The Motor Court Company]

you guys are making me want to do refi again; my refi just settled yesterday..

Crazy question.  Some of the refinance credits are $10K+.  Right now on Amerisave, each product has a $9K credit.  Assuming the costs of refi are around $3K, what is stopping someone from refi'ing every 60 days for a year and pocketing close to $36K if not more at the end of the year.  Sure the clock gets reset every time but what other costs or factors would stop someone from doing this?  From SGIPs note about having to show a benefit, you can start with 30y then move to 15y and then to 7/1 and then to 5/1.  That is 4 refinances that would all show a benefit assuming rates stay flat.

I believe there is a max credit you can close with - 1% or something?  I did the exact scenario you are describing a few years ago when rates were hitting new lows over the course of 6-9 months.  Took about 2 hours of paperwork and doc signing for each refi, but I made out quite nicely.  I don't think I'll ever be able to get that return per hour ever in my life again!

 

[sgip]

For the most part $2,000 is max cash a borrower can get out of a deal to still keep it as a "no-cash out" refinance. Once it becomes "cash out", pricing gets wacked and refinancing doesn't make as much sense.

My .02c

Soylent Green Is People

 

[The Motor Court Company]

looks like MBS and US10Y prices are touching highs after the Fed statement. My take from the Fed statement is that they think more positively about the economy so I was expecting decline in bond prices. But the market went into different direction.

Perhaps tomorrow we will see another low point for interest rates as the serial refi expert PS9 predicted?

on a different note, IO loans are piquing my interest now. But my wife is so risk averse I am not sure she will buy into it.

 

[rkp]

For the most part $2,000 is max cash a borrower can get out of a deal to still keep it as a "no-cash out" refinance. Once it becomes "cash out", pricing gets wacked and refinancing doesn't make as much sense.

My .02c

Soylent Green Is People

See attachment.  Does that mean even though they are ready to offer such a large credit, only $2K can go into my pocket?

 

[usctrojancpa]

For the most part $2,000 is max cash a borrower can get out of a deal to still keep it as a "no-cash out" refinance. Once it becomes "cash out", pricing gets wacked and refinancing doesn't make as much sense.

My .02c

Soylent Green Is People

But you can use excess credits to fund an impound account, right?  It's just that a borrower can't get a check back to them that's over $2k?

 

[ps99472]

So Morgan Stanley emailed back, it is for jumbo loans only, margin is 1.875% (1.75 for <60%LTV, FICO>740), a no cost refi with enough credits to cover closing costs will increase rates to 2.25%.  No impounds.

Alyson also has an IO product, details to come.

Can you forward me the MS contact info name? 

I was rereading the Morgan Stanley email sent to me, looks like I got it confused:

Margin is 1.875%, 1-Month LIBOR is currently around 0.168 (lucky!), so the rate would be 2.00% (rounded up or down to the nearest 1/8th).  To cover closing costs, I was quoted 2.25% with me getting 1pt offset at closing.  Don't need that much to cover costs, so then he suggested a half point at closing, which brings the rate to 2.00%.  If you have FICO > 740 and LTV < 60% the rate then becomes 1.90%

Does that make sense?  I'm assuming the margin of 1.875% is for no cost refi's.  1.625% is for loans with closing costs.  I'll have to check with Morgan Stanley on this.  Still no impounds, no prepayment penalties, PHH will service the loan but Morgan Stanley holds it in its portfolio.

If this all holds up, I don't see why I woudn't do it.  If LIBOR rates stay low, I'll probably never have to refi again (gasp!) and be able to pay off a significant amount of principal in 10 years. 

I PM'd you the contact.  I gotta do some more research on this, plus can't really do much since I'm already in a refi.  Hopefully this product is still around in 3 months

Alyson emailed back, her IO product is nowhere as good as this, believe the rate is 3.5% no cost for 5/1 IO LIBOR (margin 2.5%).

 

[ps99472]

looks like MBS and US10Y prices are touching highs after the Fed statement. My take from the Fed statement is that they think more positively about the economy so I was expecting decline in bond prices. But the market went into different direction.

Perhaps tomorrow we will see another low point for interest rates as the serial refi expert PS9 predicted?

on a different note, IO loans are piquing my interest now. But my wife is so risk averse I am not sure she will buy into it.

Like SGIP mentioned, if banks repriced today after the Fed announcment, today would've been the day to lock.  Tomorrow might see a bounce back.  As for the wife situation, just show her how much money you guys will be saving per month in interest by going with an IO versus 5/1 or even worse a 30yr.  But make sure you have enough chips to back up your bet in case the LIBOR jumps

 

[qwerty]

Why not do the third federal product I posted. I checked right now, 3/1 arm based on libor. You pay 295 in fees/closing costs and the rate is 2.25%. Now granted its principal and interest but the rate is locked for 3 years vs your monthly floating rate of 1.9-2.0, especially when it sounds you are still going to pay principal. Also, with third federal you can do re-extend your 3 year window at any time at the prevailing rate by paying something like 300-400 without having to re-apply for a refi again.
https://www.thirdfederal.com/m/default

 

[eyephone]

looks like MBS and US10Y prices are touching highs after the Fed statement. My take from the Fed statement is that they think more positively about the economy so I was expecting decline in bond prices. But the market went into different direction.

Perhaps tomorrow we will see another low point for interest rates as the serial refi expert PS9 predicted?

on a different note, IO loans are piquing my interest now. But my wife is so risk averse I am not sure she will buy into it.

Happy wife, happy life!

 

[ps99472]

So Morgan Stanley emailed back, it is for jumbo loans only, margin is 1.875% (1.75 for <60%LTV, FICO>740), a no cost refi with enough credits to cover closing costs will increase rates to 2.25%.  No impounds.

Alyson also has an IO product, details to come.

Can you forward me the MS contact info name? 

I was rereading the Morgan Stanley email sent to me, looks like I got it confused:

Margin is 1.875%, 1-Month LIBOR is currently around 0.168 (lucky!), so the rate would be 2.00% (rounded up or down to the nearest 1/8th).  To cover closing costs, I was quoted 2.25% with me getting 1pt offset at closing.  Don't need that much to cover costs, so then he suggested a half point at closing, which brings the rate to 2.00%.  If you have FICO > 740 and LTV < 60% the rate then becomes 1.90%

Does that make sense?  I'm assuming the margin of 1.875% is for no cost refi's.  1.625% is for loans with closing costs.  I'll have to check with Morgan Stanley on this.  Still no impounds, no prepayment penalties, PHH will service the loan but Morgan Stanley holds it in its portfolio.

If this all holds up, I don't see why I woudn't do it.  If LIBOR rates stay low, I'll probably never have to refi again (gasp!) and be able to pay off a significant amount of principal in 10 years. 

I PM'd you the contact.  I gotta do some more research on this, plus can't really do much since I'm already in a refi.  Hopefully this product is still around in 3 months

Alyson emailed back, her IO product is nowhere as good as this, believe the rate is 3.5% no cost for 5/1 IO LIBOR (margin 2.5%).

Here's the confirmation from Morgan Stanley:

Mr. ps9,



Please see my answers below.  I also wanted to make sure that I mentioned a qualification requirement for our interest only products.  We would need to verify in the processing of the loan that you have $500,000 in marketable securities and cash.  These funds can be in a checking account, a savings account, an investment account, or retirement accounts.  Please let me know if you have any questions.  When is your other loan expected to close?  Thank you.



1)      Confirmed.  The rate with a $3,300 credit offset would be 1.90%(1.875%+1 month LIBOR(rounded up or down to the nearest 1/8th ) and then .10% is deducted for LTV<60% and FICO of 740+)

2)      If you pay the closing costs, the rate would come down to 1.65%(1.625%+1 month LIBOR(rounded up or down to the nearest 1/8th ) and then .10% is deducted for LTV<60% and FICO of 740+)

3)      We could immediately start the process once your other refinance closes

This looks pretty good,  the half million in accounts is weird, must be a MS thing, no other lender has mentioned this before, maybe 6 months PITI but not half million.  It's like we'll give you this kick ass rate only if you have an escape route.

 

[The Motor Court Company]

for these enticing IO loans, I need to play devil's advocate. What are the benefits to the lenders to offer these products? they lend you a large amount of money but charge very little interest, why? Are they expecting LIBOR to jump? Are they running out of prime borrowers to lend their money? Are they trying to get sub-prime borrowers to foreclose them later on and get the equity?

For the half mil , does it have to be in MS accounts? If so, these low rates are perks for parking your money in their accounts?

By the way, half mil in marketable securities and cash is not that hard to meet. Even 99%er like us can meet that requirement.

 

[eyephone]

for these enticing IO loans, I need to play devil's advocate. What are the benefits to the lenders to offer these products? they lend you a large amount of money but charge very little interest, why? Are they expecting LIBOR to jump? Are they running out of prime borrowers to lend their money? Are they trying to get sub-prime borrowers to foreclose them later on and get the equity?

For the half mil , does them have to be MS accounts? If so, these low rates are perks for parking your money in their accounts?

By the way, half mil in marketable securities and cash is not that hard to meet. Even 99%er like us can meet that requirement.

The fed already indicated to expect interst rates to rise mid year.

 

[The Motor Court Company]

that may change, and if they follow the schedule, it will be mild, and LIBOR and fed fund rate may not always track each other.

The fed already indicated to expect interst rates to rise mid year.

 

[ps99472]

The 1 month LIBOR will have to rise to 0.72 (current is 0.17~) for the interest payment to equal that of a 2.5% 5/1 ARM.

So bottomeline, if the LIBOR quadruples in the next 5 years, you made the wrong move by going with this IO product instead of a 5/1 ARM.  The earlier the LIBOR quardruples, the less cash you'll have to accelerate your principal payment.

 

[ps99472]

Hmm this IO product should be perfect for Hidden Canyon, get in quick in the early phases, greige everything, get some grass down, make sure you don't have a 4 in your address, and sell it to FCB for $650/sq ft.

 

[The Motor Court Company]

HC prefers cash buyer I think?

Hmm this IO product should be perfect for Hidden Canyon, get in quick in the early phases, greige everything, get some grass down, make sure you don't have a 4 in your address, and sell it to FCB for $650/sq ft.

 

[bones]

The 1 month LIBOR will have to rise to 0.72 (current is 0.17~) for the interest payment to equal that of a 2.5% 5/1 ARM.

So bottomeline, if the LIBOR quadruples in the next 5 years, you made the wrong move by going with this IO product instead of a 5/1 ARM.  The earlier the LIBOR quardruples, the less cash you'll have to accelerate your principal payment.

I spoke to some smarter people than me about this loan and most say it's a no-brainer (esp with LIBOR in the foreseeable future), but did caveat that they would only pull the trigger if they can get a reasonable ceiling rate, controls on max annual rate increases and an ability to fix the rate at a point in time for a fee.  I'm reaching out to my MS contact to see if he can do this loan as well.  Thank you PS9 for the contact info though