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Started By
Message
Is this legitimate? 15 year fixed mortgage
Posted on 10/29/15 at 3:49 pm
Posted on 10/29/15 at 3:49 pm
I get these in the mail often and usually throw them away, but today I decided to actually take a look at it. My wife and I bought our house two years ago and we plan on building in about 7-10 years. Advantages? Disadvantages? Too good to be true as far as no fees, etc.?
Y'all learn me something please!
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Y'all learn me something please!
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4
Posted on 10/29/15 at 3:53 pm to NSTIGERSAINT
I've always heard a good rule of thumb is for your APR and APY to be within 1/4 of a point of each other. Being that they are a full point apart I would beware of fees.
ETA: $4K + worth of fees rolled into the loan. That cuts into a lot of the savings right there.
ETA: $4K + worth of fees rolled into the loan. That cuts into a lot of the savings right there.
This post was edited on 10/29/15 at 3:55 pm
Posted on 10/29/15 at 6:34 pm to NSTIGERSAINT
They are just letting you finance the $4500 or so of fees they're charging. I have no idea what your current rate is but even if you are a candidate for a refinance you could probably do better shopping around.
ETA: If you started your current note in October 2013 then unless your credit was really bad then you are probably not a candidate to refi at all. Rates then were comparable to what they are now. It's hard to say more without knowing more specifics but this does not sound like a good deal.
ETA: If you started your current note in October 2013 then unless your credit was really bad then you are probably not a candidate to refi at all. Rates then were comparable to what they are now. It's hard to say more without knowing more specifics but this does not sound like a good deal.
This post was edited on 10/29/15 at 6:37 pm
Posted on 10/29/15 at 7:49 pm to foshizzle
Both my wife and I have credit scores in the upper 700/lower 800 range. I think our rate is just below 4.5%. I was just thinking if it would help equity wise when we eventually sell in the next 7-10 years. We can comfortably afford a higher note but according to what you say it might just be a moot point. Thank you.
Posted on 10/29/15 at 8:20 pm to NSTIGERSAINT
I'm in the process of refinancing with standard mortgage. I got 2.875 for 15 years, only 450 appraisal fee and about 100 of lender fees. Then I will have title fees.
Posted on 10/30/15 at 7:18 pm to NSTIGERSAINT
If your rate is 4.5% and you're planning to sell in the next 7-10 years then I highly doubt it would be worth a refi unless the costs were *significantly* lower than the $4500 they're asking.
Run the numbers in a spreadsheet but just glancing at it this doesn't seem worthwhile and it isn't close.
Run the numbers in a spreadsheet but just glancing at it this doesn't seem worthwhile and it isn't close.
Posted on 10/31/15 at 1:58 am to foshizzle
I'm going from 4.125 and I will save about 70k over the life of the loan.
Posted on 10/31/15 at 12:19 pm to LSU1018
With all due respect, I don't think you're doing your calculations correctly. I plugged the numbers into a spreadsheet and your total interest cost over ten years (since you said it'd be about that long before you move) is only about $56K for your current mortgage and $32K for the second. That's a $25K savings over ten years.
That might sound good, but it doesn't take into account the effect of inflation, which will reduce your savings (a dollar saved ten years from now is worth less than an extra dollar in monthly payment today). And if you itemize then you get to deduct the interest from your taxes, which is good for you but reduces the interest difference between the two.
Also, in order to get this you have a higher monthly payment (I'm guessing around $340 or so). Your rate of return on that higher amount is very close to zero after taxes and inflation, and you are foregoing the ability to earn a better return somewhere else.
So the bottom line is that it's quite a bit more complicated than just looking at the total amount of interest saved over the life of the loan - and the factors I mention above work to substantially reduce your actual savings. I highly recommend working the numbers through a spreadsheet.
That might sound good, but it doesn't take into account the effect of inflation, which will reduce your savings (a dollar saved ten years from now is worth less than an extra dollar in monthly payment today). And if you itemize then you get to deduct the interest from your taxes, which is good for you but reduces the interest difference between the two.
Also, in order to get this you have a higher monthly payment (I'm guessing around $340 or so). Your rate of return on that higher amount is very close to zero after taxes and inflation, and you are foregoing the ability to earn a better return somewhere else.
So the bottom line is that it's quite a bit more complicated than just looking at the total amount of interest saved over the life of the loan - and the factors I mention above work to substantially reduce your actual savings. I highly recommend working the numbers through a spreadsheet.
Posted on 10/31/15 at 1:43 pm to LSU1018
What bank or lender? I was quoted 3.00 for a 10 year-$2,600 in closing.
Posted on 10/31/15 at 8:22 pm to foshizzle
Thanks for the long explanation, I was always enjoy learning something.
Posted on 11/1/15 at 7:30 am to Sprescott
I used standard mortgage, I locked in rate last week. Iberia bank was the second lowest quote I got at 3.0 with about $500 in lender fees.
Posted on 11/1/15 at 4:25 pm to NSTIGERSAINT
quote:
They are just letting you finance the $4500 or so of fees they're charging.
This. So you'll pay interest on the additional $4500 over the life of the loan. 15 years.
The real question is, do you really need the extra $4500 from the equity in your home? Do you not have that to pay for the closing costs? Plan to to pay credit card or other revolving debt with it?
Posted on 11/1/15 at 8:52 pm to NSTIGERSAINT
as mentioned, almost an entire point diff between rate and apr. lots of fees etc
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