Buy or refinance now!

ignorant wrote: I would recommend this.. Simply put homes are not good investments. I've read some articles and done some thinking myself. Here's the conceptual breakdown. You own a home for 30 years and purchase for $50,000 and sell for $400,000. Wow you think $350,000 in profit. Well yes and no.. If you subtract all the improvements you made to your house, deck, new windows, paint, landscaping, .. You're in the 2-3% per year of appreciation... Not that great, when you can do annualized 5-7% out of an index fund.

If you look at buying a home as an investment, sure. However, you are ignoring the cost of housing should you not buy a home and rent instead...

Personally, I am really looking forward to a paid-for home at under 45 years old. Right now, 2013 looks to be an interesting year for me... as it looks like my house and my current car payment will be completed that year.

With regards to paying extra - my mortgage is held by my bank, and I can simply transfer money into my mortgage as if I was transferring it between accounts. Super-easy, reliable and it's been working really well for us. My first mortgage in the US was done through a broker and it was a pain in the butt to deal with - I actually walked out of my first closing as he'd changed the numbers on me. Since then, I've been dealing directly with banks and had a much smoother experience. Plus, my mortgage stays in one place.

I'm meeting with my mortgage guy to sign everything for the new 15-year mortgage on Friday. He was a little surprised when he pulled up our account and saw how much we'd paid it down in the past few years!

Keith your experience is not the norm. Banks aren't allowed to keep many of their mortgages. Especially 30 year ones. Just about the only loans the banks will make and hold forever are ones of 7 years are less.

Banking regs require them to keep a certain percentage of their deposits liquid and a mortgage eats up that number very quickly so banks don't tend to be the #1 spot for a mortgage loan. They are great for 2nd liens, car loans, etc., but not so much a mortgage.

UNLESS they have a different mortgage division and are deemed Too Big to Fail. And then they get to break all the rules that everyone else has to live by.

In reply to carguy123:

My mortgage is paid online thru the servicing company and If I put in more than the standard monthly payment it gives me options of where I want the extra to go. I can make additional monthly payments or I can put the extra towards principle. If I put in less than the monthly payment I can do a principle only payment or a partial monthly payment so paying extra every month is very easy to do.

I am currently working on refinancing the 30 year mortgage on the house we bought last year into a 15 year mortgage. We have been paying extra toward the mortgage every month on the 30 year above what the payment will be on the 15 year so we might as well take advantage of the rates right now (3.875 fixed on the 15 year)

MAKE SURE you check the box that says it is for principle, not additional monthly payments.

Paying an extra monthly payment is mostly paying interest in advance- the bank's profit.

Paying principle early reduces the indebtedness. The monthly interest due is calculated against the indebtedness.

So, if you are in the 2nd year of a 30 year mortgage, a principle payment reduces the amount of interest due for the next 336 months!

Plus, it reverse amortizes in your favor (that's the interest on the interest on the interest).

carguy123 wrote: Keith your experience is not the norm. Banks aren't allowed to keep many of their mortgages. Especially 30 year ones. Just about the only loans the banks will make and hold forever are ones of 7 years are less. Banking regs require them to keep a certain percentage of their deposits liquid and a mortgage eats up that number very quickly so banks don't tend to be the #1 spot for a mortgage loan. They are great for 2nd liens, car loans, etc., but not so much a mortgage. UNLESS they have a different mortgage division and are deemed Too Big to Fail. And then they get to break all the rules that everyone else has to live by.

Wells Fargo. One of the bigger ones, at least around here. They were able to match the same rates as the brokers but without me getting into any shouting matches.

Lemme tell you, the whole mortgage and banking thing is dramatically different in Canada. I don't remember seeing a 30-year note before I moved here, and having only 4 banks across the country makes a huge difference - good and bad.

In reply to Keith:

I used American Interbanc to get my mortgage, and ended up with Wells Fargo as my mortgage provider. Both were pretty decent to deal with.

Speaking of prepaying monthly mortgage payments. Most mortgage companies won't allow you to prepay more than 1-3 payments. They've found in the past that if they don't have contact with you for too long of a period you tend to disappear.

Any extra money you pay has to go to one of 2 things, principle or any escrow shortages. It can't go toward paying interest in advance. I'd still recommend a separate check and a note in the same envelope.

Hey never did I say you should rent vs buy..

I'm just saying home's are not investments, unless someone else is paying the bills(renting it out)...

Yes I want a paid off home when I retire + a lake/mtn house and I'll have it, one day. UGH!!! student loans.

As interest rates come down, the spread between long term rates and short term rates narrows. Right now, thirty year loans are going for around 4.5% and 15 year loans are going for around 4.0% so you’re only getting around a 0.5% benefit in exchange for committing to paying the loan off in half the time. Additionally, the interest you’re paying is deductible so if you’re in the 25% tax bracket like most home owners, your real net benefit is only going to be 0.375%.

Here’s a comparative scenario to exemplify the point:

15 Year Loan: $100,000 at 4.0% = $739.69 Minimum Monthly Payment 30 Year Loan: $100,000 at 4.5% = $506.69 Minimum Monthly Payment

If you get the 30 year loan at 4.5% but pay $765 each month, you’ll pay the loan off in the same15 year period. You will have paid $4,555.80 more (12 X 15 X $25.81) but since you’ll get 25% of that back in the form of reduced taxes, your real cost will be $3,416.85.

What you effectively get for that $3,416.85 is an insurance policy that allows you to pay $230 less per month ($739.69 – 506.69) for the life of the loan should you ever find yourself in a difficult situation.

Are you regimented enough to actually pay the extra on the payment every month? Most people aren't. They have good intentions but life quickly gets in the way. If you're most people you need the 15 year loan so that you actually make those payments.

I've seen people who can make themselves make the extra payment each month, I've seen people who pay their own taxes and insurance, but MOST people won't make the extra payment nor will they save all the need so that paying their own taxes and insurance isn't a hardship when the due date arrives.

I've tried it both ways and I'll admit I'm a slacker. If the taxes aren't in the payment I'll "borrow" a little I have saved to pay them with all good intentions of paying it back in time but somehow come Christmas something has to give and since the govt won't, it has to be the presents for the kiddies or the wife. Even tho I know how advantageous it is to pay extra on my payment and I preach it to everyone I just won't do it regularly. I can't make myself pay a small amount extra each month, but for some reason I can drop some extra big bucks on the loan about twice a year.

Learn yourself. Do what is comfortable for you, but DO!

Keith wrote:

carguy123 wrote: Keith your experience is not the norm. Banks aren't allowed to keep many of their mortgages. Especially 30 year ones. Just about the only loans the banks will make and hold forever are ones of 7 years are less. Banking regs require them to keep a certain percentage of their deposits liquid and a mortgage eats up that number very quickly so banks don't tend to be the #1 spot for a mortgage loan. They are great for 2nd liens, car loans, etc., but not so much a mortgage. UNLESS they have a different mortgage division and are deemed Too Big to Fail. And then they get to break all the rules that everyone else has to live by.

Wells Fargo. One of the bigger ones, at least around here. They were able to match the same rates as the brokers but without me getting into any shouting matches. Lemme tell you, the whole mortgage and banking thing is dramatically different in Canada. I don't remember seeing a 30-year note before I moved here, and having only 4 banks across the country makes a huge difference - good and bad.

Good info in this thread.

Kieth, Wells Fargo services your loan, but probably doesn't ownthe loan.

You can see if Fannie Mae owns it here: http://www.fanniemae.com/loanlookup/

PeterAK, Mortgage Banker

In reply to PeterAK:

Yep, they own mine. Quick question for you guys. I have a relative who is in danger of foreclosure and has a Fannie Mae owned loan. Is their a way to expedite the process of getting one of the govt sponsored/encouraged refi. They have been trying for several months and keep getting put off by the banks.

Does anyone have a working crystal ball that can say where interest rates are going in the next 14 days? I understand that rates are related to the 10 year bond market?

No balls, or at least that's what my wife says, but it appears to be a pretty stable few days.

I just locked a 30 year fixed at 3.875% so that means rates have actually fallen a little since I started the thread.

But before most of you go running out clamoring for a 3.87% rate from your Mortgage Brokers just know that this was a perfect person with a less than 70% LTV. Most people would have gotten a 4.125% rate, which still ain't too shabby!

I have started the paperwork but haven't locked a rate yet. Do you think they may go lower than they are now?

TRoglodyte wrote: I have started the paperwork but haven't locked a rate yet. Do you think they may go lower than they are now?

The punchline to the oldest joke in the mortgage business is: 'you should have locked yesterday'.

Now you tell me!

I have proven to be capable of influencing the entire mortgage industry - with some tremblings of the stock market. If I'm going in for a refi or a loan, the rates will spike for just long enough for me to get my paperwork done. So all you folks who are looking, I predict rates will fall to 2% for the next month as I locked in a week ago

Thanks for taking one for the team, hope you're right.

At the moment there's nothing really in the works that should make it change much up or down, but we've got a long week end so if anything happens in the world market before ours opens up on Tuesday it will react more than normal, but then it will settle down a few days later.

If you are looking for the magic time to lock on a weekly basis it goes like this.

Friday is typically the highest rate day in comparison to the market because it's CYA day. The world market opens up on our Sunday so if rates were due to go down they will go down less than normal on Friday because the market might change on Sunday. Conversely if rates look like they should go up they will go up too much to compensate for Sunday.

Monday is a "could go either way day" cause it depends upon what happened in the world market on Sunday.

Tuesday and Wednesday are the golden days for locking since we are more in lock step with the world at that point.

Thursday is a "could go either way day" cause we're getting close to Friday.

I've looked for a magic time of the month for years, but there are too many variables for me to find a magic time of the month.

Anytime Bernanke speaks all bets are off.

Thanks carguy. I tend to overthink everything. Rates seemed to be lower on wednesday of last week,until unemployment info came out and wasn't as bad as expected? Approaching a three day weekend things could get freaky in the Asian or European markets by tuesday when our banks open.Any advice on what to look at on monday? Experience matters and I have none.