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

[Irvine Dream]

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

To be honest I am surprised that people like PS9 who already has a 2.5% interest rate is still interested in these type of loan products.  Eventhough I try to get the best deal for everything for my primary residence I rather have the assurance of low fixed rates.  That probably explains the wealth difference between others and me.  Time to rethink everything.

 

[eyephone]

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.

Think about it. They will make money on advising fees.
(Industry standard fees) financial advisor fees 1.5%, mutual fund fees 1% which is a total advisor fees of 2.5%, then they there is an additional fee percentage of annual return (ranges from 5 to 7%)

Note: Fees may vary from different investment advisory companies and this does not represent MS fees. 

 

[bones]

Ok spoke to my MS banker.  He can do the loan also.  Rate is 1.65%+1 month LIBOR on 70% LTV.  Closing costs of $3k that I can roll into the loan.  There is no relationship pricing for this type of loan so the $500k PS9 posted about shouldn't have to be in MS accounts.  They do have relationship pricing for their ARM products - just not for this one.  Ceiling for the loan is 12%. 

 

[The Motor Court Company]

so how does MS make money out of this deal?

 

[bones]

so how does MS make money out of this deal?

they pool and sell?

 

[eyephone]

so how does MS make money out of this deal?

Did you read my previous posts regarding advising fees? Also, they will sell the loan or service it.

 

[ps99472]

Not conforming so they can't sell to Fannie/Freddie.  MS keeps it in their own portfolio.  The range is $50k to $10 million.  If you have a $10 million dollar home, that is cheap money. 

I forwarded the MS offer to my zillow broker, she read through it, didn't see anything weird. She did mention big banks are moving away from Fannie/Freddie, so maybe this is a new trend?  Gonna run it by my $300+ Cpa and see what she thinks.

 

[bones]

http://www.housingwire.com/articles/30967-morgan-stanley-joins-the-jumbo-rmbs-party

And now Morgan Stanley (MS) is set to bring its first jumbo RMBS of the year to market soon. Morgan Stanley Residential Mortgage Loan Trust 2014-1 is supported by 291 mortgages with a total balance of approximately $256.5 million.

Fitch Ratings has issued its presale report and awarded $229.29 million in AAA ratings to the securitization?s two largest tranches.

According to Fitch, the high quality of the mortgage pool and the quality of the loan originator are significant positive indicators for the securitization?s future performance.

The collateral pool consists of seven-year hybrid adjustable-rate mortgages to borrowers with ?strong credit profiles, low leverage, and substantial liquid reserves,? Fitch said.

 

[Bullsback]

Risk profile would be pretty minimum if they are looking at LTV's of 50%. I guess in one of the scenarios it was an LTV of 70% which would present some more risk but if they are giving this ultra low programs on properties with that much equity, the risk is minimalized. They than wrap it and sell it to someone who gets a slightly higher return than they would on other fixed products (presumably). 

 

[Irvine Dream]

Not conforming so they can't sell to Fannie/Freddie.  MS keeps it in their own portfolio.  The range is $50k to $10 million.  If you have a $10 million dollar home, that is cheap money. 

I forwarded the MS offer to my zillow broker, she read through it, didn't see anything weird. She did mention big banks are moving away from Fannie/Freddie, so maybe this is a new trend?  Gonna run it by my $300+ Cpa and see what she thinks.

 

[qwerty]

To be honest I am surprised that people like PS9 who already has a 2.5% interest rate is still interested in these type of loan products.  Eventhough I try to get the best deal for everything for my primary residence I rather have the assurance of low fixed rates.  That probably explains the wealth difference between others and me.  Time to rethink everything.

i dont know that you have to rethink everything.  the way i look at it, some of the stuff that PS9 is doing is trimming the fat to save a little here, a little there, but those savings arent going to make you rich/wealthy, you need to have the money coming in the door to become rich.  besides, all of PS9s refi savings goes into those huge family meals he buys, for every 1 dollar in refi savings, he spends 2 on food

 

[qwerty]

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

it cant be a no brainer with all those caveats right?

 

[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

it cant be a no brainer with all those caveats right?

Yes and no. The guy that said some of those caveats is more risk adverse and speaking for his primary residence. He would def do it with his rental properties. At the end of the day, it just depends on what your risk appetite is. And what your plans are for the property you are thinking about for this loan type. And what your general overall financial situation is.  That's why this loan type exists as part of MS' lending suite. Not one product is right for everyone.

 

[ps99472]

Trying to catch up from my misinformed 30 year mortgage sucker days

 

[ps99472]

Saving $3-400/month in interest is not too shabby, pay off mortgage in 10 years, go part time, join IHOs around the world cruise, I'm set.

 

[irvinehomeowner]

The IHOs will not be cruising around the world.

I'm in Irvine until the Zpocalyspe... I'll even have PStar throw my ashes from the Orange (red?) Balloon.

 

[socal78]

I'll even have PStar throw my ashes from the Orange (red?) Balloon.

Sounds messy. I am going to be cremated and have my ashes turned into gun powder for a 21 CANON Salute at the Great Park veterans' cemetery so it can shatter every window within a 1.2 miles radius.

 

[eyephone]

Not conforming so they can't sell to Fannie/Freddie.  MS keeps it in their own portfolio.  The range is $50k to $10 million.  If you have a $10 million dollar home, that is cheap money. 

I forwarded the MS offer to my zillow broker, she read through it, didn't see anything weird. She did mention big banks are moving away from Fannie/Freddie, so maybe this is a new trend?  Gonna run it by my $300+ Cpa and see what she thinks.

I read your post when I was in the car. I think you deleted it.  BTW - How much did your accountant charge you to ask about a rental property?

 

[The Motor Court Company]

you better watch your weight otherwise you may not get a chance to spray your ashes.http://rt.com/usa/194572-fire-cremation-oversized-body/

I'll even have PStar throw my ashes from the Orange (red?) Balloon.

Sounds messy. I am going to be cremated and have my ashes turned into gun powder for a 21 CANON Salute at the Great Park veterans' cemetery so it can shatter every window within a 1.2 miles radius.

 

[socal78]

you better watch your weight otherwise you may not get a chance to spray your ashes.http://rt.com/usa/194572-fire-cremation-oversized-body/

I'll even have PStar throw my ashes from the Orange (red?) Balloon.

Sounds messy. I am going to be cremated and have my ashes turned into gun powder for a 21 CANON Salute at the Great Park veterans' cemetery so it can shatter every window within a 1.2 miles radius.

Hi. Can you please stop following me around from thread-to-thread just to launch personal attacks? It has gotten really old.