Is anyone here- - Page 2

BarTopDancer · 03-20-2007, 01:02 PM

You are also counting on the fact that housing prices will continue to rise. You don't want to find yourself upside down at the end of 10 years because your area's market tanked.

Ghoulish Delight · 03-20-2007, 01:06 PM

Quote:

Originally Posted by Nephythys

I will get no money in hand by doing this.

By "money in hand" I meant the $150/month difference in payments.

Alex · 03-20-2007, 02:30 PM

Assuming you pay only interest on an interest only loan, this is very bad unless you already have a fair amount of equity in your home (which, I'm guessing, you don't). If you have to sell your house any time in the next few years, you'll likely find yourself underwater on it and barely able to get enough out of the sale to pay off the mortgage or not being able to do even that. Yes, if your market continues to appreciate you can come out ahead but there is no guarantee, particularly in the short term, and any emergency need to get out from under the mortage (loss of employement, etc.) will have you selling cheaper than you might have otherwise done.

If you take an interest only loan and are faithful about making additional principal payments, it may work out (having the option in an unexpectedly lean month to pay very little). However, if you're feeling a pinch that the $150 monthly savings is very attractive to you, then you probably aren't in a position to pay much principal each month anyway and you're still in the first boat. Especially if you're using the HELOC on the 2nd to continuously draw out what you're paying in.

You downplay at $300 (almost 30%) jump in payment (just from the 30-year fixed; when and how much will the 2nd be reamortized) after 10 years but keep in mind that you are chasing now a $150 reduction in payment. It could be that in 10 years that will be an insignificant change but it could be that it will be a blow as big as it would be today.

There's a reason interest only is generally a subprime type of lending. Because people with great credit and plenty of money don't want it. If interest only made much sense, then the rich people would be doing it.

If the reason you were initially considering it was debt consolidation and that isn't going to be a result of this refinance I would back off for a little while and give it a lot of thought. And try talk to other experts than just the woman trying to sell you on a loan. And be very honest with yourself about whether you'll faithfully pay principal. Do not include in the benefits column anything you aren't completely certain you do.

Nephythys · 03-20-2007, 03:24 PM

I am not feeling a pinch- finances are better than ever in fact (paid off my car with the tax refund). I am about to pay off two credit cards that have MONSTER interest rates.

I don't even know what you mean about HELOC and drawing out- I am not going to pull anything- so I am not sure what this means.

My main goal was not debt consolidation- it was getting out of the ARM Balloon loan.

Ghoulish Delight · 03-20-2007, 03:36 PM

Quote:

Originally Posted by Nephythys

I don't even know what you mean about HELOC and drawing out- I am not going to pull anything- so I am not sure what this means.

I think he's referring to your mention that the second loan would be available as a line of credit. It seemed to infer that you might use it as such.

And I guess I'm a little confused as to your goal, since you said initially "I wanted to get money out of it (if possible) to consolidate debt."

So, in the end what Alex and I are saying is, unless you need the extra $150/month as liquid cash or you need to consolidate your debt, you're better off waiting or finding other options than taking an interest-only loan for now. As long as you've got plenty of time before your balloon payment kicks in, you aren't doing yourself any favors by refinancing before the penalty period is over. The goal is to refinance as few times as you can get away with since each time you do it's going to cost you up front.

Nephythys · 03-20-2007, 04:02 PM

Quote:

Originally Posted by Ghoulish Delight

I think he's referring to your mention that the second loan would be available as a line of credit. It seemed to infer that you might use it as such.

Naw- I was just repeating the info from the woman at Chase. I have no plan to use the money.

Quote:

And I guess I'm a little confused as to your goal, since you said initially "I wanted to get money out of it (if possible) to consolidate debt."

It was a goal- but did not work out that way based on the #'s she gave me. So no, I would not be using this for debt consolidation.

Quote:

So, in the end what Alex and I are saying is, unless you need the extra $150/month as liquid cash or you need to consolidate your debt, you're better off waiting or finding other options than taking an interest-only loan for now. As long as you've got plenty of time before your balloon payment kicks in, you aren't doing yourself any favors by refinancing before the penalty period is over. The goal is to refinance as few times as you can get away with since each time you do it's going to cost you up front.

I actually sent the lender a document with a lot of the info I have gathered from you guys (and others)-

I have alot of questions now- and obviously need to know more about it before doing anything more.

Alex · 03-20-2007, 04:28 PM

Ah, since that was the only benefit (other than monthly payment you mentioned) I jumped to a conclusion.

If you aren't hurting for the extra $150 a month and if you don't get any debt consolidation out of it, it sounds like you can relax and take your time and know exactly where you're jumping to.

Sorry, I slipped into work lingo with HELOC. Home Equity Line of Credit.

Nephythys · 03-20-2007, 05:20 PM

Thanks GD and Alex- really.

I asked alot more questions- I know more about the loan and I also spoke to her about a fixed rate 30 year P/I loan as well. Same as I am paying now- just not IO.

She did point out though- if I can pay that anyway, then do the IO, pay that loan amount and I will be paying more principal than on the regular P/I loan.

Lots to think about but both options are on the table.

Sub la Goon · 03-21-2007, 05:40 AM

Being in the mortgage industry, I can say that right now there is generally a lot of angst and hand-wringing going on over interest rates, defaults, Sub-Prime risk, housing values, etc.

As a result, it's harder for people to be approved for Fixed Rate loans (unless your Credit Score is outstanding and you don't need money anyway).

Right now would be a good time to sit and wait and see where things go in the next several months. I hope your ARM loan isn't going to re-cast soon (potentially increasing your monthly payment substantially). My hope is that you can wait out the 2 year Prepay Penalty and the market will have calmed down.

In general, my best advice is to pay off as much Principal as you can and build that equity. Kind of a no-brainer, but hey... Also, do whatever you can to boost your credit score(s) to be in the best position to Refi at a good rate when the time is right. This includes things like having 3 credit cards that you USE and PAY OFF every month. Getting rid of them all or just not using them does not help. There are plenty of sources for more Credit Score (FICO) advice.

Good luck and stay the fiscally conservative course!

Nephythys · 03-22-2007, 04:24 PM

Just an update-

I had the # for another lady who does mortgages working with the realtor I used. She is going to see what she can do for me as well-

What IS mortgage etiquette? Do I tell the Chase lady I am having someone else look at it?

03-20-2007, 01:02 PM	#11
BarTopDancer Prepping... Join Date: Jan 2005 Location: Here, there, everywhere Posts: 11,405	You are also counting on the fact that housing prices will continue to rise. You don't want to find yourself upside down at the end of 10 years because your area's market tanked. __________________ Spork is the new MacGyver Postcards From My Edge
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03-20-2007, 02:30 PM	#13
Alex . Join Date: Feb 2005 Posts: 13,354	Assuming you pay only interest on an interest only loan, this is very bad unless you already have a fair amount of equity in your home (which, I'm guessing, you don't). If you have to sell your house any time in the next few years, you'll likely find yourself underwater on it and barely able to get enough out of the sale to pay off the mortgage or not being able to do even that. Yes, if your market continues to appreciate you can come out ahead but there is no guarantee, particularly in the short term, and any emergency need to get out from under the mortage (loss of employement, etc.) will have you selling cheaper than you might have otherwise done. If you take an interest only loan and are faithful about making additional principal payments, it may work out (having the option in an unexpectedly lean month to pay very little). However, if you're feeling a pinch that the $150 monthly savings is very attractive to you, then you probably aren't in a position to pay much principal each month anyway and you're still in the first boat. Especially if you're using the HELOC on the 2nd to continuously draw out what you're paying in. You downplay at $300 (almost 30%) jump in payment (just from the 30-year fixed; when and how much will the 2nd be reamortized) after 10 years but keep in mind that you are chasing now a $150 reduction in payment. It could be that in 10 years that will be an insignificant change but it could be that it will be a blow as big as it would be today. There's a reason interest only is generally a subprime type of lending. Because people with great credit and plenty of money don't want it. If interest only made much sense, then the rich people would be doing it. If the reason you were initially considering it was debt consolidation and that isn't going to be a result of this refinance I would back off for a little while and give it a lot of thought. And try talk to other experts than just the woman trying to sell you on a loan. And be very honest with yourself about whether you'll faithfully pay principal. Do not include in the benefits column anything you aren't completely certain you do.
	Submit to Quotes

03-20-2007, 03:24 PM	#14
Nephythys Yeah, that's about it- Join Date: Jan 2005 Location: In a state of constant crap to get done Posts: 2,688	I am not feeling a pinch- finances are better than ever in fact (paid off my car with the tax refund). I am about to pay off two credit cards that have MONSTER interest rates. I don't even know what you mean about HELOC and drawing out- I am not going to pull anything- so I am not sure what this means. My main goal was not debt consolidation- it was getting out of the ARM Balloon loan.
	Submit to Quotes

03-20-2007, 04:28 PM	#17
Alex . Join Date: Feb 2005 Posts: 13,354	Ah, since that was the only benefit (other than monthly payment you mentioned) I jumped to a conclusion. If you aren't hurting for the extra $150 a month and if you don't get any debt consolidation out of it, it sounds like you can relax and take your time and know exactly where you're jumping to. Sorry, I slipped into work lingo with HELOC. Home Equity Line of Credit.
	Submit to Quotes

03-20-2007, 05:20 PM	#18
Nephythys Yeah, that's about it- Join Date: Jan 2005 Location: In a state of constant crap to get done Posts: 2,688	Thanks GD and Alex- really. I asked alot more questions- I know more about the loan and I also spoke to her about a fixed rate 30 year P/I loan as well. Same as I am paying now- just not IO. She did point out though- if I can pay that anyway, then do the IO, pay that loan amount and I will be paying more principal than on the regular P/I loan. Lots to think about but both options are on the table.
	Submit to Quotes

03-21-2007, 05:40 AM	#19
Sub la Goon Ride me! Join Date: Jul 2006 Location: The line forms here... Posts: 326	Being in the mortgage industry, I can say that right now there is generally a lot of angst and hand-wringing going on over interest rates, defaults, Sub-Prime risk, housing values, etc. As a result, it's harder for people to be approved for Fixed Rate loans (unless your Credit Score is outstanding and you don't need money anyway). Right now would be a good time to sit and wait and see where things go in the next several months. I hope your ARM loan isn't going to re-cast soon (potentially increasing your monthly payment substantially). My hope is that you can wait out the 2 year Prepay Penalty and the market will have calmed down. In general, my best advice is to pay off as much Principal as you can and build that equity. Kind of a no-brainer, but hey... Also, do whatever you can to boost your credit score(s) to be in the best position to Refi at a good rate when the time is right. This includes things like having 3 credit cards that you USE and PAY OFF every month. Getting rid of them all or just not using them does not help. There are plenty of sources for more Credit Score (FICO) advice. Good luck and stay the fiscally conservative course! __________________ You roll the dice, you move your mice. Last edited by Sub la Goon : 03-21-2007 at 05:46 AM.
	Submit to Quotes

03-22-2007, 04:24 PM	#20
Nephythys Yeah, that's about it- Join Date: Jan 2005 Location: In a state of constant crap to get done Posts: 2,688	Just an update- I had the # for another lady who does mortgages working with the realtor I used. She is going to see what she can do for me as well- What IS mortgage etiquette? Do I tell the Chase lady I am having someone else look at it?
	Submit to Quotes