How low can we go? 30 yr fixed at 3.75% with no fees...
- Thread starter ps99472
- Start date
NEW -> Contingent Buyer Assistance Program
Very true, but if your reasonable plan is to remain for 20+ years, it's difficult for me to justify an ARM.
Of course this is just all my "hypothesis" vs. any actual fact. I know my general expectation is the house I am moving into will be it (unless I get relocated / lose a job / downsize in retirement).
Very true. Locking down historically low rates for 30 years makes lot of sense if you see the house turn into rental whenever you move out. But, with Irvine market, chances are that the house will be terrible rental property with ever rising MR and HOAs. Might as well enjoy lower cost ARM, and 5-7-10 years later move out or refi as your conditions allow at that point.
Most TIers buying these 800k homes are at a point in life where our kids won't be attending IUSD anymore in 7-10 years from now. Personally, I would not have many reasons to live in Irvine at that point.
Talked to a few banks. B of A is able to offer 3.375% for 30-year fixed jumbo refi with no points if you transfer $500K in assets over and keep it with them for at least 3 months. You will have to incur the fees yourself though. That's the lowest refi I was able to find thus far.
Standard 5/1 or 7/1 ARMs actually helped borrowers in the last downturn as their rates went down without having to refinance (and possibly unable to refi due to being underwater). It was the teaser ARMs with 1% interest only in the first year and no income verification that was deadly.
If you buy a $1,000,000 home with 1% interest only for the 1st year followed by 5% P&I after that with no money down:
1st year: $800/mo mortgage payment
2nd year: $5,368.22/mo mortgage payment
http://bbs.stardestroyer.net/viewtopic.php?style=4&t=97269
Very True
The problem was most people paid the lowest payment where it deferred the interest instead of either the interest only or the principal+interest (these loans had at least 3 payment options every month).
This way, based on your cash flow, you could pay more or less. The one thing that people don't mention is that during the reset years, where your payment was supposed jump up, that was usually 5 years down the road, and if 2005/06 was when most of these loans occurred, by 2010/11, the rates were so low that your lowest payment actually covered all the P&I and then some. So even if you deferred interest, you would be paying that off in a low interest environment.
The one thing we did not do when we used an OArm is put down less than 20%. You could say that was our hedge against possible rising rates and higher payments. This also would allow us more refinance options in the future.
That reset tsunami the article mentions and something Larry always talked about didn't happen. Why? Rates went down instead of up... I have a friend in his old OArm and he hasn't refi'd out because his full P&I is so low and he has the option to pay less if he needs to.
There's a bit too much certainty in this conclusion. Should read, "... you'llend up ahead likely be able to manage through prospective rising rate scenarios ..."
PenFed or Navy Fed?
I'd opt for a 7/1 ARM at 2.625%.
That is great rate. Is it investment property rate or PR/second home?
NavyFed. Why 7/1 ARM over 5/5? Fixed low interest rate over 7 years does sound better but I don't think they gave us that option for refi. We'll ask our loan officer.
We also have the option of 30 year fixed at 3.375 but I think with origination fees and all, closing will cost us about $40k. And honestly we'll probably be in this house at most 10 years. The goal in that 10 years is to pay maximum principal with lowest monthly payments to allow additional cash flow for outside investments.
Perspective
Well-known member
qwerty said:
Very true, but if your reasonable plan is to remain for 20+ years, it's difficult for me to justify an ARM.
I think we are heading into a period where people are going to stay at places longer. The market just isn't the same as it once was when it comes to that, imo. We are already seeing a trend of increasing renters and renters will have the flexibility, but I think as part of this, we will also see a trend where you have people staying in places longer (due to appreciation and inability to move up) which will drive more sales being related to people downsizing, relocation, or job loss vs. what happened back in the day. This is especially true given the affordability levels that exist in South Orange County.qwerty said:
Of course this is just all my "hypothesis" vs. any actual fact. I know my general expectation is the house I am moving into will be it (unless I get relocated / lose a job / downsize in retirement).
Cornflakes
Active member
qwerty said:
Very true. Locking down historically low rates for 30 years makes lot of sense if you see the house turn into rental whenever you move out. But, with Irvine market, chances are that the house will be terrible rental property with ever rising MR and HOAs. Might as well enjoy lower cost ARM, and 5-7-10 years later move out or refi as your conditions allow at that point.
Most TIers buying these 800k homes are at a point in life where our kids won't be attending IUSD anymore in 7-10 years from now. Personally, I would not have many reasons to live in Irvine at that point.
IrvineBS said:
Talked to a few banks. B of A is able to offer 3.375% for 30-year fixed jumbo refi with no points if you transfer $500K in assets over and keep it with them for at least 3 months. You will have to incur the fees yourself though. That's the lowest refi I was able to find thus far.
irvinehomeowner
Well-known member
My first house was 5% down on an adjustable rate (forgot what they called it back then, wasn't 5/1 or 7/1). On my homes after that I did a few Option ARMs (refis too) and that latest one is a 5/1.
But now that I'm long in the tooth and fat in the belly... will probably go 30-year fixed since we probably won't move anymore.
Although recently while driving to Newport, the Mrs. was talking about that Newport Bluffs area off of McArthur and Bonita... gah.
But now that I'm long in the tooth and fat in the belly... will probably go 30-year fixed since we probably won't move anymore.
Although recently while driving to Newport, the Mrs. was talking about that Newport Bluffs area off of McArthur and Bonita... gah.
paperboyNC
New member
Compressed-Village said:
Standard 5/1 or 7/1 ARMs actually helped borrowers in the last downturn as their rates went down without having to refinance (and possibly unable to refi due to being underwater). It was the teaser ARMs with 1% interest only in the first year and no income verification that was deadly.
If you buy a $1,000,000 home with 1% interest only for the 1st year followed by 5% P&I after that with no money down:
1st year: $800/mo mortgage payment
2nd year: $5,368.22/mo mortgage payment
http://bbs.stardestroyer.net/viewtopic.php?style=4&t=97269
irvinebullhousing
Well-known member
paperboyNC said:
Very True
irvinehomeowner
Well-known member
Having had an Option ARM, if you managed it properly it worked well.paperboyNC said:
The problem was most people paid the lowest payment where it deferred the interest instead of either the interest only or the principal+interest (these loans had at least 3 payment options every month).
This way, based on your cash flow, you could pay more or less. The one thing that people don't mention is that during the reset years, where your payment was supposed jump up, that was usually 5 years down the road, and if 2005/06 was when most of these loans occurred, by 2010/11, the rates were so low that your lowest payment actually covered all the P&I and then some. So even if you deferred interest, you would be paying that off in a low interest environment.
The one thing we did not do when we used an OArm is put down less than 20%. You could say that was our hedge against possible rising rates and higher payments. This also would allow us more refinance options in the future.
That reset tsunami the article mentions and something Larry always talked about didn't happen. Why? Rates went down instead of up... I have a friend in his old OArm and he hasn't refi'd out because his full P&I is so low and he has the option to pay less if he needs to.
usctrojancpa
Well-known member
Whether it's a regular ARM, Option ARM, or even I/O ARM....if you are good with managing your money and use the loan properly you'll end up ahead versus opting for a 30-year fixed. That being said, ARM loans are not for everyone.
Perspective
Well-known member
USCTrojanCPA said:
There's a bit too much certainty in this conclusion. Should read, "... you'll
usctrojancpa
Well-known member
Paris said:
PenFed or Navy Fed?
I'd opt for a 7/1 ARM at 2.625%.
usctrojancpa
Well-known member
I locked in a 3.75% 30 year fixed conforming loan with 1.5pts credit (will pay for closing costs and a chunk of my impound reserves) on my Aliso rental with Alyson yesterday. ;D
Cornflakes
Active member
USCTrojanCPA said:
That is great rate. Is it investment property rate or PR/second home?
Paris167
New member
USCTrojanCPA said:
NavyFed. Why 7/1 ARM over 5/5? Fixed low interest rate over 7 years does sound better but I don't think they gave us that option for refi. We'll ask our loan officer.
We also have the option of 30 year fixed at 3.375 but I think with origination fees and all, closing will cost us about $40k. And honestly we'll probably be in this house at most 10 years. The goal in that 10 years is to pay maximum principal with lowest monthly payments to allow additional cash flow for outside investments.
