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May 14, 2009
Refinancing: How Sweet It Is
We've had a 6 percent 30-Year fixed mortgage since we bought our house in 2005. With rates at historic lows, we, like many people, started looking into refinancing earlier in the year, but had to put it on hold until we got tax extensions, and then returns, filed. When we spoke with the mortgage specialist at Chase in February the conforming loan limit for a two-family house in Brooklyn was just south of $800,000. When we got on the phone yesterday morning we were pleased to learn that the conforming limit had recently been raised to $934,200; the single-family limit is $729,750. We were able to do a 90-day lock for a 1/4 point at 5 percent. Here's where you have to start to question how low prices can really go: With rates where they are right now, you could, say, buy a $1.2 million house and lock in mortgage payments of $5,000 a month; assume you make $1,500 on your rental and you're down to $3,500; throw in the tax breaks and you're down to $2,500; add back in $1,000 a month for taxes and insurance and you're back up to $3,500. $3,500 a month to own your own house in New York City and have, say, 2,400 square feet of living space for yourself (three out of four floors). The trickier part comes when you need to finance more than that $934,200. Have any readers gotten financing for significantly more than that recently? How did you structure it? We heard from Chase that HELOCs are quite hard to get right now?
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Comments
Doesn't that lovely little model only work if you have at least $150,000 cash to cover the down payment and all the other costs?
Posted by: lemur11215 at May 14, 2009 10:54 AM
As always, it depends where you're looking. A 4-storey 3000+ sqft house house in Cobble Hill, Boerum Hill, Carroll Gardens or Park Slope is going to be a lot closer to $2M than $1.2M. The numbers might add up in more marginal neighborhoods.
Posted by: Smudge at May 14, 2009 10:55 AM
Um, I guess bargains are all relative...
Posted by: Brenda from Flatbush at May 14, 2009 10:56 AM
also a great deal if you happen to work in a industry with any job security. some people just don't get it.
Posted by: martis at May 14, 2009 11:00 AM
Answer these questions Retards!
How many months have you paid into the first mortgage??????!!!!!
How much INTEREST have you paid into the first mortgage???!!!!!
Will the offset be less into the second mortgage?????!!!!!
Has the bell rung in your head when you realized you will make more that 360 mortgage payments plus fee's??????!!!!!
Did you know the average stay in a house is 7 years and maybe NOT REFINANCING is a better way to go!!!!
Hey Brownstoner you got a MBA from Armpit OH Community College break out the Excel spreadsheet and tell what ya got, STUPID!
The What
Someday this war is gonna end...
Posted by: Return of The What at May 14, 2009 11:03 AM
I am trying to refi with Astoria Federal now
my prob is - I have a good credit score, great rental income but I don't make a lot of money.
so here's hoping I get approved that would solve some of my issues :)
I was offered 5.2 plus a point b/c am trying a cash-out refi - but would still be way under the 934K
Astoria said they aren't doing any HELOC anymore!
wow - how times have changed!!
Posted by: gemini10 at May 14, 2009 11:03 AM
Sounds like something that could work for many New Yorker's .
If you people sit here and continue to complain you will get nowhere .
Posted by: sebb at May 14, 2009 11:04 AM
It works if you are refinancing and your house is appraised for at least $1,250,000.
To buy though, you will need to put more than 20% down. When hubby and I were looking at a house last fall, the mortgage broker said we'd need to put at least 30% down for that particular zip code (in Red Hook.). Is there a bank out there willing to lend $700,000 with 20% down?
Posted by: Maly at May 14, 2009 11:05 AM
I agree Mr. B. I think NYC housing has bottomed within 10% meaning a 500k ask might fetch 475k +/- and a 1mm ask might fetch 925k or so. I think that's it for the housing crash here in NY. Before we all know it, it'll be 2010 & nationally the crash started 4Q of 2005. By 2012 housing will start rising & perhaps even earlier based upon my models. By 2014-15, prices will be back to 2005-06 which put us in line with previous declines retracing back to the mean. With rates so low & tax credits being given to 1st time homebuyers, one would be a silly fool not to consider buying right here & now. Buy now or be priced out forever because this time next year that $8000 tax credit will be history & prices will be stable with a 50/50 split between buyers & sellers only to favor sellers as each month progress from there.
Posted by: PropJoe at May 14, 2009 11:06 AM
Those are reasonable considerations, What, but we've had our mortgage for about 3.5 years and are lowering our monthly nut by $1,000 which is pretty significant; also, and you're not going to like to hear this, we have no plans to move...
Posted by: brownstoner at May 14, 2009 11:10 AM
Buy now or be priced forever. Ha!
I thought it would be at least 4 years before I read that old chesnut, according to MY models.
Posted by: Maly at May 14, 2009 11:11 AM
Conforming limit on a 4 family is $1,403,400 million...
I think that is more interesting. There are a number of 4 family buildings in the Cobble Hill/Carroll Garden's area that are south of $2mil asking.
Hell, this one is asking $1.6
http://brownstonelistings.com/index.cfm?page=details&id=1011
Offer $1.4 and you might be able to finance the entire thing...
Posted by: christopher at May 14, 2009 11:11 AM
"Here's where you have to start to question how low prices can really go"
I'm confused. Are you suggesting that the scenario you describe puts some sort of floor under prices (meaning there's a minimum level below which the market won't go because it's so cost-effective to buy at, say, $1.2 million)? That $1.2 million is some sort of sweet spot because of the availability of $730,000 to $934,200 of conforming financing?
Or are you saying max conforming loan limits (and the unavailability of HELOCs, etc.) will put downward pressure on prices because there aren't that many buyers with the wherewithal (or motivation) to put $270,000-$450,000 down on a $1.2 million brownstone in Clinton Hill?
Honestly, the scenario you present seems to make a good case for either argument, depending on the circumstances of your hypothetical buyer.
Posted by: JKB at May 14, 2009 11:14 AM
"3.5 years and are lowering our monthly nut by $1,000 which is pretty significant"
HOW MUCH INTEREST HAVE YOU PAID INTO YOUR FIRST MORTGAGE AND ADD ON THE FEE'S!!!!!! IS THE "OFFSET" A BENEFIT BROWNSTONER?????????!!!!!!!!!!!!!!!!!!!!!!
3.5 YEARS 42 MORTGAGE F**********PAYMENTS PLUS FEES BROWNSTONER!!!!!
WHERE IS THE F*********** BENEFIT BY REFINANCING????????!!!
MATH MOTHER F*********S THE MATH!!!!
The What (GOD Damn how stupid can you get!)
Someday this war is gonna end...
Posted by: Return of The What at May 14, 2009 11:17 AM
Christopher, I don't think any bank is willing to do 100% LTV any more. Those were the crazy times. What's annoying is that the lenders now are overcompensating, asking for 35% down to protect their back ends.
Posted by: Maly at May 14, 2009 11:24 AM
I'm kind of with the What on this. I didn't want to refinance even though I was paying 7.25%. It was a balloon mortgage and I was saving enough to be able to own the house outright in 13 years when the loan matured, as well as paying off extra every month. Why pay the bank more finance and finagling charges if I can hack it and then own the house in 13 years? Well, then I lost my second job and just making the monthly payment would have been tough, never mind saving for the lump payment in 13 years. So I'm in the process of refinancing for a 30 year fixed rate at 4.625%, which lowers our monthly payment by $750. The bank wins!
Posted by: mshook at May 14, 2009 11:26 AM
What...I am confused why past mortgage and interest payments are even relevant. What is relevant is future payments, and how much will be saved there versus the fees to refinance. If Brownstoner is not planning on moving nor refinancing in the near future (at rates these low I doubt you will ever have another need to refinance), then why doesn't it make sense to refinance.
Where I disagree with Brownstoner is arguing that lower rates will bottom out the housing market. There are alot more issues at hand, most importantly unemployment rates and job stability, where NYC overindexes in. Add that to the fact that NYC was late to the ballgame and popping this real estate bubble, and I see plenty of downward pressure on housing going forward, including brownstone brooklyn.
Posted by: dcorreale at May 14, 2009 11:28 AM
Because you will save more money by refinancing mshook, regardless of whether you can handle the prior payments. If you want to own earlier, just prepay principal. Hell, if you can own outright in 13 years, why not refinance to a 15 year mortgage and get even better rates
Posted by: dcorreale at May 14, 2009 11:31 AM
christopher: That is a real nice looking home. But I doubt you can get it for 1.4 maybe closer to the asking price.
Posted by: sebb at May 14, 2009 11:33 AM
You have to pay taxes on the rent, right, Stoner?
Since you are placing yourself in an effective 28% bracket (you say you get $1,000 tax break on $3,500 mortgage), that means you should add $440/month. Now you are up to $4K or so a month.
Deal is sounding less great, even if you can find your 4-story dream home at that price (I think 3-story is more realistic, but whatever).
Plus, by this logic, get ready to watch the value of your place tank when rates rise even modestly back towards (still historically low levels) of 6% or a bit below.
Then, by your rule of thumb, the next round of folks looking to buy places like yours will need to pay way under $1 million to make their numbers add up the same way yours are doing.
You may still have your monthly expenses set, but you may wind up sitting on an incredibly shrinking asset.
Food for thought. . .
Posted by: ontheparkway at May 14, 2009 11:35 AM
"What...I am confused why past mortgage and interest payments are even relevant. "
Because you do not understand Money=Time concept! Brownstoner has already made 42 mortgage payments! If he refi's tten he will make 402 Mortgage payments or 33.5 years!
The Retards are only looking at the monthly payments and not the whole picture!!
"If Brownstoner is not planning on moving nor refinancing in the near future (at rates these low I doubt you will ever have another need to refinance), then why doesn't it make sense to refinance."
The average stay in a Home is 7 years! What is Brownstoner's future????? Shit happens and He or his wife may have to sell.
"I see plenty of downward pressure on housing going forward, including brownstone brooklyn."
Right!!! Why don't Brownstoner send in 13 payments per year! Have the 13th Payment go to Principle and reduce his mortgage like that and he will not have to pay fees, What a novel fucking idea!!!!!!!!! If you send in 13 payments per year the 30 year mortgage turns in 22.5 years. Get fucking EXCEL and crunch the numbers you idiots!
The What
Someday this war is gonna end...
Posted by: Return of The What at May 14, 2009 11:44 AM
You know something? I am convinced that educated people are very fucking stupid! This post proves that!
The What
Someday this war is gonna end..
Posted by: Return of The What at May 14, 2009 11:48 AM
"Because you do not understand Money=Time concept! Brownstoner has already made 42 mortgage payments! If he refi's tten he will make 402 Mortgage payments or 33.5 years!"
I completely understand the idea of time value of money. Do you understand the idea of sunk costs? What has been paid in the past is irrelevant, what is left on the mortgage going forward is all that is irrelevant. If there is $500,000 more on the mortgage would you rather pay 7% or 5% on that loan. Yes, it extends it out extra months, but you could go and pay the same exact monthly chunk you were paying before, and just put the extra money towards paying principal instead of the higher interest rate, and you will pay off the loan even sooner than before. You just have to make sure the fees associated with the refi make sense, and dropping 2% on that size loan will repay itself in less than 2 years
Posted by: dcorreale at May 14, 2009 11:51 AM
"What has been paid in the past is irrelevant, what is left on the mortgage going forward is all that is irrelevant'
Then rent a apartment then because your not trying to amortized the loan you just renting from the bank and they are making money off the interest! The objective is to payoff the mortgage not lowing your monthly costs!!!
If Brownstoner refi's then he will flush 3.5 years of hard work paying off the first mortgage down the drain and will have to start all over again! This is the CONFUCKINGCEPT that you don't see.
I'm done guys! If you want to use these "False Assumptions" then be my guess.
The What
Someday this war is gonna end..
Posted by: Return of The What at May 14, 2009 12:02 PM
What, refinancing can be the smart thing to do if you have discipline. If Mr B keeps making the higher payments, he will prepay an additional $1,000 a month. That would translate to 22 extra years in addition to the 3.5 he has already put in. In other words, he will save himself 4.5 years of payments, what's that? $270,000?
Mshook, there are great calculators available to figure out how much you can save by refinancing and prepaying your mortgage on bankrate.com and a whole slew of other financial sites.
Posted by: Maly at May 14, 2009 12:10 PM
Somebody needs a "Time Out."
The refi question is only relevant to how long it takes to breakeven given the amount of fees & points you shell out to do the refi vs. the lower monthly payment. That's all. it's pretty simple.
Posted by: daveinbedstuy at May 14, 2009 12:14 PM
If I could get a 4 story for $1.2m in a neighborhood where I could rent at $1,500/mo per floor I would buy. Don't think that is the reality right now though. Those are prime CG/CH/BH rents and just south of $2 at best seems to be the current market these days.
Plus this would have to be a long-term bet as the next buyer in a resale will almost certainly face higher interest rates causing values to continue declining, as astutely pointed out above.
Posted by: thedudeabides at May 14, 2009 12:14 PM
For Ontheparkway, remember that any building improvements or repairs you make that also affect the rental portion of your house are tax deductible for that portion, so that will offset the taxes a bit. (For a $1000 plumbing job, you'd deduct 25% for a 4-story w/ garden floor rental.)
For Dcorreale, we ran the same numbers the What is mentioning before we decided to refinance. For the early years of your mortgage, most of your monthly payment is applied to interest, not principal, precisely because most people move or refinance within 5 years. So you have to calculate back in the additional interest you'll be re-paying at the lower rate, and the extra years you'll be adding on the back end of your mortgage (to keep Brownstoner as an example, he'll be paying for 33.5 years instead of 30). Because of all that and the closing costs of a new loan, people are advised not to refinance unless rates are a full point lower than what they have.
However, only knowing my own numbers and not Brownstoner's, I'd have to guess that he'll easily make these costs back within several years. Three and a half years is not that long to be making payments, so he hasn't tossed away that much interest.
While our payments went down a lot, they didn't go down quite as much per month as Mr. B's. Still, when we looked at the life of the refi'd loan vs. the life of the existing loan, it turned out that we'd be paying about 200K less in interest (again, most of which you pay in the beginning) than if we stuck with the rate we had. And that's accounting for the interest we'd already paid for our first loan. We'll make back our closing fees in about a year.
Posted by: petunia at May 14, 2009 12:14 PM
"If Brownstoner refi's then he will flush 3.5 years of hard work paying off the first mortgage down the drain and will have to start all over again!"
I guess the question is: has he already paid down the principal enough that those 3.5 years of payments weren't wasted? Hate to say it, but What may be right, because those first 3.5 years are almost entirely interest payments, aren't they?
On another point, these refis only work if you have enough equity, right? For those who bought at the height of the market with 10% down, it's unlikely their property will be appraised at a high enough rate to permit them to refinance. So what happens when all the folks with 5-year variable mortgages are suddenly hit with larger monthly payments, but they can't refinance? That's another crisis in the making.
Posted by: Park Sloper at May 14, 2009 12:14 PM
And I still don't see it. Lets take a $1,000,000 home, you put 20% down, have an $800,000 mortgage at 7% interest rate, resulting in a monthly payment of $5,322. By the end of year 3, you will have paid off $26,000 in principal, left with $774,000. Whether you refi or not, either way you are left with $774,000. If you refi to 5%, your monthly payment is now $4,154 versus $5,322. What is your point? That there will be an extra 3 years at the end of the mortgage? Doesn't have to be, just continue to pay the $5,322, except now, instead of $808 going towards principal repayment, there is $2,100 going towards principal repayment. You pay the loan off considerably earlier
Posted by: dcorreale at May 14, 2009 12:17 PM
Nothing wrong with refinancing if the present value of the after-tax interest reduction is higher than the costs to do the deal. All else should be held equal.
Posted by: thedudeabides at May 14, 2009 12:19 PM
Dcorreale: But just because you have a 7% interest rate doesn't mean you're paying only principal plus 7% interest each month. Most banks have you paying something like 90% interest and 10% toward principal each month during the first years of a mortgage. So in your example, although I admit I don't really understand your numbers, I'm not sure it's right that you would have paid off $26,000 in principal
Posted by: Park Sloper at May 14, 2009 12:22 PM
They are almost entirely interest payments because you are paying the fixed rate on a larger base. You are still going to pay that fixed rate on that larger base regardless of whether you refinance or not. Banks do not charge higher interest rates in the earlier years, you pay almost all interest because you have a higher amount to payback. So again, do you want to pay 5% or 7% on whatever your mortgage is today?
Posted by: dcorreale at May 14, 2009 12:23 PM
"$3,500 a month to own your own house in New York City and have, say, 2,400 square feet of living space for yourself (three out of four floors)."
+ ($240K + $250K + $660K - $666K)/(60 mos) = $11,567 a month if sold for half off FIVE YEARS later
OR
+ ($240K + $250K + $360K - $666K)/(120 mos) = $5,033 a month if sold for half off TEN YEARS later (no divorce, no relocation, no job loss, no default)
$240K = 20% Down
$250K = Min. Renovation (easy for that price)
$660K = Loan balance after five years
$360K = Loan balance after ten years
$666K = Half Off Peak Comps (Assuming -10% so far)
...and the pleasure of a part-time job as landlord.
Simple math not including interest (loan balances above actually higher), fees, maintenance, utilities, etc., which all clobber any tax benefit.
Why not just outsave interest rate hikes (said hikes will only add to the already downward spiral in prices thus self-cancelling out the monthly payment effect anyway) and wait for half off (or where ever else the chips may fall), then dive in? In the mean time rent a duplex, triplex or a single family home in the burbs without the hidden costs (downpayment, depreciation, ownership responsibilities, bank/broker fees, landlord stress, etc).
"Here's where you have to start to question how low prices can really go..."
Prop prop prop prop it up [home value]!
***Bid half off peak comps***
Posted by: Brownstones Half Off at May 14, 2009 12:24 PM
Park Sloper, you are still paying the fixed rate of interest on the principal, but it is mostly interest at the early stages because of the amount of principal. It is done so you have an equal payment for all 30 years. Obviously, as you paydown principal, you owe less interest (but at the same rate). Banks are not charging you more in the early years, they are charging you the same amount, but off of a higher base
Posted by: dcorreale at May 14, 2009 12:26 PM
Refi is great in theory but difficult in practice. We just tried to refi out 2BR with Citibank and got an appraisal 100K less than we paid for the place in 2003 and less than 60% of the appraisal from a 6-month old refi!
When our mortgage broker asked the bank what was going on it turned out the appraiser was based on Long Island and was utterly unfamiliar with Brooklyn real estate and the concept of 4-unit co-ops. They based our appraisal on a fire sale of an apartment less than half our size.
So now we're out over a $1000 and over two months time and still paying a mortgage over a point above market.
Posted by: Brettson at May 14, 2009 12:26 PM
Sorry, Dcorreale, I was replying to your first post, not your second. It took a long time for my reply to go through for some reason.
I think the combination of the disappearance of crazy bonus-money buyers at the top end, and the glut of condos at the lower end, will stretch the bottoming out of house prices for a little while, even though I agree that the low interest rates and gov't incentives to buyers are worth looking into now even if prices themselves might fall a bit farther in the next year or two. For regular middle-class NY'ers who have jobs that aren't in finance or media, the tide may finally be turning their way.
Posted by: petunia at May 14, 2009 12:28 PM
For Ontheparkway, remember that any building improvements or repairs you make that also affect the rental portion of your house are tax deductible for that portion, so that will offset the taxes a bit. (For a $1000 plumbing job, you'd deduct 25% for a 4-story w/ garden floor rental.)
For Dcorreale, we ran the same numbers the What is mentioning before we decided to refinance. For the early years of your mortgage, most of your monthly payment is applied to interest, not principal, precisely because most people move or refinance within 5 years. So you have to calculate back in the additional interest you'll be re-paying at the lower rate, and the extra years you'll be adding on the back end of your mortgage (to keep Brownstoner as an example, he'll be paying for 33.5 years instead of 30). Because of all that and the closing costs of a new loan, people are advised not to refinance unless rates are a full point lower than what they have.
However, only knowing my own numbers and not Brownstoner's, I'd have to guess that he'll easily make these costs back within several years. Three and a half years is not that long to be making payments, so he hasn't tossed away that much interest.
While our payments went down a lot, they didn't go down quite as much per month as Mr. B's. Still, when we looked at the life of the refi'd loan vs. the life of the existing loan, it turned out that we'd be paying about 200K less in interest (again, most of which you pay in the beginning) than if we stuck with the rate we had. And that's accounting for the interest we'd already paid for our first loan. We'll make back our closing fees in about a year.
Posted by: petunia at May 14, 2009 12:28 PM
Parksloper...that crisis is already upon us. We are just at the beginning.
Posted by: tomgee at May 14, 2009 12:30 PM
What,
So Mr. B saves $12000/yr in mortgage payments. That's more than $300k over the next 26 years. What is your calc. as to how much more interest he will pay over that time due to resetting the amortization schedule? How much is the $12k/yr likely to earn, invested conservatively, over 26 years? What will years 27-30 cost him?
Here is another way to look at it: by resetting the amortization schedule, how much less principle will Mr. B pay this year than he would have under the old schedule? Subtract that number from the $12k he is pocketing, and you get your answer as to whether this is a good move. If you think he's wrong, use the numbers, put up a spreadsheet, and show us. It would be a public service.
Posted by: slopefarm at May 14, 2009 12:30 PM
Dcorreale: thanks for the explanation. But the issue remains that if you've only owned for 3.5 years, you haven't paid off much of the principal since you've been paying mostly interest. So starting from scratch with a new 30-year mortgage, on a slightly smaller principal, saves you some money (yes, I'd rather pay 5% than 7% on what remains), but may not save you THAT much if you only live in the place for another 5-10 years, given (1) what you paid in during the first 3.5 years, including fees, and (2) the fees you'll pay for the new mortgage. Of course, the Brownstoner family intend to live in Clinton Hill until they die, so it's another story for them.
Posted by: Park Sloper at May 14, 2009 12:36 PM
A couple of more details to help the discussion. Original loan started at $1 million, now it's down to almost the conforming level of $934,200, so the refi'd loan will start at $934,200. Right now (using round numbers) assume we're currently paying $6,000 a month, $1,300 of which is going to principal. Day 1 of the new loan close to $1,200 will be going to principal, so if we decided to use the $1,000 savings to pay down principal, isn't the choice: (A) spend $6,000 a month, $4,700 of which going to interest or (B) spend $6,000 a month with only $3,800 a month going to interest? You lose on the interest deduction but your principal's getting paid down almost twice as fast. Thoughts? If What is right, obviously we want to know! No one's got a gun to our head to refinance...
Posted by: brownstoner at May 14, 2009 12:36 PM
I just don't get the resetting the amortization schedule argument. You can artifically unreset it by using the monthly savings to directly pay principal instead of some principal but mostly higher interest payments due to higher interest rates.
Look at it from the banks perspective...In year 1 of a mortgage they get the same monthly payment as year 30. Obviously, in year 1, about 90% is interest and in year 30, about 10% is interest. Does that mean that they prefer year 1?? The answer is no. They are still getting the same interest rate in both years, but in year 1 you owe the bank alot more money. So if anything, they prefer year 30, because they know their money is now AAA+ rated with all of the equity backing the payments, versus year 1, where default is much more likely. Now of course the bank has a portfolio of mortgages, with both year 1s and year 30s to diversify risk
Posted by: dcorreale at May 14, 2009 12:39 PM
my first comment posted twice - I'm sorry!
It sounds like Bretton may have had the same appraiser we had (from Long Island as well). It's not a factor of falling prices when it comes in sub-2003 levels, it's sloppy appraising and overcorrecting from the sloppily high appraisals of years past.
With the new rules about appraiser/bank contacts in place, is there anything a homeowner can do *before* an appraisal firm is hired to make sure they're familiar with the local market?
Posted by: petunia at May 14, 2009 12:40 PM
Park sloper, you bring up some important points and other points I believe are not relevant.
Points that do matter:
How long you plan on being there going foward
How much in fees you have to pay for new mortgage
Points I don't think matters
How much interest versus principal you have already paid...I personally do not believe this matters, you were not paying a higher interest rate for the priviledge of paying a lower interest later. You borrowed a sum of money, and you paid a rate on that money, disregarding the principal repayments you have paid. You are not going to reborrow a sum of money, and pay a lower rate on it
Posted by: dcorreale at May 14, 2009 12:43 PM
Yes Brownstoner, that is what I have been trying not so eloquently to explain. What is past is past, not relevant. What is relevant if the fees it will cost you to refi versus the monthly savings (and how long you expect to collect these monthly savings, i.e. how long you plan on living there). In your case, a refi seems like an absolute no brainer
Posted by: dcorreale at May 14, 2009 12:46 PM
Its not the fees, the appraisal or the points that make refis hard in NYC - its the taxes! you maybe able to get the old mortgage consolidated but it isnt easy, if not the taxes make refi costs prohibitive for everyone but the guy who intends to die in his home.
Posted by: fsrg at May 14, 2009 12:50 PM
Mr. B- You could have gotten a better deal. Rates bottomed yesterday/today.
Refinancing makes sense for some and not for others. If you can recoup your costs within 2-3 years and have the added safety of a lower payment (which everyone can appreciate) I say it makes sense. Overall you will save money over the long run.
That's all I'm going to say
Disclamer-I do this for a living
Posted by: Adam Dahill at May 14, 2009 12:52 PM
Petunia: According to our broker the big change is that banks not brokers pick the appraisers now. Obviously in both cases the appraisers know who is paying their bills and they act accordingly. While I don't believe the value of our apartment went up 50% I don't believe it went down 20% either.
I have heard other people have had issues with recent Citibank appraisals (We got 24 hour Appraisers) undervaluing properties. Not sure what if anything we can do.
Posted by: Brettson at May 14, 2009 12:53 PM
I basically agree with Dcorreale - in Mr. B's case, without having the amortization tables I used previously (a real estate lawyer ran the numbers for us) it seems pretty certain that the savings in interest going forward will quickly surpass the 3.5 years of interest paid that is essentially thrown out. Of course, this "lost" interest does become relevant if you've already lived in your house for, say, 5 years, and you're thinking of leaving in another 5. The old interest minus tax-deduction should be added in along with closing fees as non-reimbursable costs.
The tables for the old mortgage should be near the back of all the closing docs you got, and can be compared if you request the tables on the new mortgage.
Posted by: petunia at May 14, 2009 1:00 PM
Adam,
We locked our rate yesterday...are you saying we could have gotten a better deal with another lender? we could have gotten 4.75 if we'd paid a full point...
Posted by: brownstoner at May 14, 2009 1:01 PM
This seems to be the best calculator I've found:
http://www.forthebestrate.com/java/MortgageRefinance.html
Posted by: MR at May 14, 2009 1:06 PM
Petunia, I am arguing the "lost interest" previously paid is irrelevant. I don't care if you been there for 20 years and your montly payments are now 75% principal...refi can still make sense. As long as there is enough time and a large amount left on the principal to make up the fees for the refi, it can makes sense.
I feel like people are arguing that you pay a higher rate in the early years to get a lower rate in the later years, but this is not true. You are not going through some rite of passage in the early years, you are merely paying the same interest rate on a higher base, a higher base which is the same regardless of whether you refi or not
Posted by: dcorreale at May 14, 2009 1:10 PM
Mr B- I think the 4.75 would have been a better choice for 1 pt. After thinking about it you did good compaired to other lenders. I don't want to start any squabbling. I just would have slashed my margin for you and done the loan at cost since I get some business from your site. Sort of repaying you for allowing me to comment on mortgages all the time on your site.
I'm closing my parents loan on Monday and locked them yesterday. I told them that they can't tell anyone what they got because everyone would be on my for the same. They did give birth to me. I think a mortgage rate at cost is the least I could do. :)
Today is slightly better but be careful as when rates get this good bond traders selloff taking profits driving the rates back up for a few weeks. When rates get this good they stay for about 2-3 days and move higher for a few weeks. The same pattern has been in effect since late December.
Congrats-90 day rate lock is good.
Posted by: Adam Dahill at May 14, 2009 1:25 PM
As a landlord in the trenches trying to get apartments rented in one of the most desirable parts of NYC, I don't think you folks (especially Brownstoner) has any idea what's happening right now.
I hate to admit it, but there's tons of rental inventory out there and very few new NYC renters (folks moving to NYC to start new jobs). To me, it feels like the rental market is dead -- just a few tire kickers looking to get better deals.
Rents have effectively dropped to 2000 levels (nearly a ten year price retraction) on new rentals and it logically follows that the same thing will happen with sales prices.
The hypothetical $1.2 million dollar two unit townhouse Brownstoner believes is such a reasonable deal could easily be worth eight or nine hundred thousand by this time next year -- and don't forget, who the hell knows where interest rates will be by then?
Posted by: IronBalls at May 14, 2009 1:27 PM
Well, we have had all our business and personal accounts with Chase for 15 years so they're keeping the costs pretty low, but thanks for the offer! So you really think this is the low point for rates?
Posted by: brownstoner at May 14, 2009 1:29 PM
What needs some help with Excel. Perhaps a computer class at the local community college will help.
As DIBS said, the refi issue is purely a matter of fees versus decrease in monthly payments, especially if, as in Mr. B's case, the UPB is roughly the same for the existing and new mortgages.
Posted by: FatLenny at May 14, 2009 1:33 PM
Not to mention, right now it's not hard to find a two or three bedroom garden duplex in prime Park Slope for $4000/mo. I saw one myself this week.
It makes much more sense to rent in the best neighborhood than (according to Brownstoner's best case scenario hypothesis) pay $3500/mo to own in a fringe neighborhood further from subways, shopping, and Prospect Park.
Especially since buying into a falling market is nuts . . .
Posted by: IronBalls at May 14, 2009 1:37 PM
" If you think he's wrong, use the numbers, put up a spreadsheet, and show us. It would be a public service."
Oh no I'm done...
"What,
So Mr. B saves $12000/yr in mortgage payments. That's more than $300k over the next 26 years. What is your calc. as to how much more interest he will pay over that time due to resetting the amortization schedule? How much is the $12k/yr likely to earn, invested conservatively, over 26 years? What will years 27-30 cost him?"
Build a Time Machine and go back to 2005 and start again. Time is equal to Money.
"Look at it from the banks perspective...In year 1 of a mortgage they get the same monthly payment as year 30. Obviously, in year 1, about 90% is interest and in year 30, about 10% is interest. Does that mean that they prefer year 1?? The answer is no. They are still getting the same interest rate in both years, but in year 1 you owe the bank alot more money."
I would go into a long rant but, I will let this statement stand on it's own. You know what would make me happy? Continue being a Debt Slave to the Plutocracy...
"What is past is past, not relevant. What is relevant if the fees it will cost you to refi versus the monthly savings (and how long you expect to collect these monthly savings, i.e. how long you plan on living there). In your case, a refi seems like an absolute no brainer"
Brownstoner this post will prove my thesis that the average American is fucking Brainwashed and is incapable of defending him/her self intellectually. This why The Plutocracy is robbing every body blind! Mathematics is a true science, there no falsehoods in it. Welcome to the Greater Depression fools..
The What
Someday this insanity is gonna end..
Posted by: Return of The What at May 14, 2009 1:47 PM
Another reason I believe points matter is that on a multi-family house, the proportion of points paid which are allocated to rental units (i.e., 3/4 in an evenly divided owner occupied 4 family) are not deductible in the year of puchase but must be amortized over the life of the mortgage.
So you're not getting a tax break on 3/4 of your points right away - which sucks. Check this with an accountant - maybe the rules have changed.
Posted by: MaxOthermoxx at May 14, 2009 1:56 PM
I don't know why The What has to undermine his own perfectly good argument by going ballistic.
He's right; if you've already had a mortgage for a while, a lower rate is not in and of itself automatically good.
But others are also right, that if you use your lower rate to pay off more principal, you can save yourself a lot of money, even if you don't live in the house for 30 years.
But What can't stand to acknowledge that anyone else in the world can be anything but a "complete fucking retard," so instead he totally ignores that point. And so people who actually COULD benefit from What's original point, just because he's the one making it.
Posted by: basementalist at May 14, 2009 2:19 PM
... sorry, I mean people who actually COULD benefit from What's original point *will end up ignoring it*, just because he's the one making it
Posted by: basementalist at May 14, 2009 2:21 PM
Ironballs is right -- if you don't already own, it's still a bad deal right now.
Mr. B is right to refi, but wrong to think it means the market is hitting bottom.
Posted by: ontheparkway at May 14, 2009 2:22 PM
metaphase, regarding your third point, have you seen a graph comparing the performance of the s&p over the last 10 years to that of a Brooklyn Townhouse over the last 10 years?
You would have saved a lot of dough having your cash stuck in a down payment.
Posted by: FatLenny at May 14, 2009 2:28 PM
This post will prove that someone is off his meds.
Posted by: FatLenny at May 14, 2009 2:36 PM
"I don't know why The What has to undermine his own perfectly good argument by going ballistic."
If I made the the points without profanity people still would ignore everything. Look at you, on one hand you say " He's right; if you've already had a mortgage for a while, a lower rate is not in and of itself automatically good." and then " But others are also right, that if you use your lower rate to pay off more principal, you can save yourself a lot of money, even if you don't live in the house for 30 years." Then to top it all off " And so people who actually COULD benefit from What's original point, just because he's the one making it." and then you realized your point and now " ... sorry, I mean people who actually COULD benefit from What's original point *will end up ignoring it*, just because he's the one making it"
You can't make this stuff up and this shows how confused Americans are. Look at this little diddy "Mr. B is right to refi, but wrong to think it means the market is hitting bottom.". I guess you have not been around Williamsburg, Greenpoint, L.I.C. and Downtown Brooklyn was there are tons of new Condo projects going up and will have devestaing effect on prices.
The What (I'm off my Meds???? OK..)
Someday this war is gonna end...
Posted by: Return of The What at May 14, 2009 2:47 PM
I dont know what the F The What is talking about - I guess I;m retarted.
If I borrow 1M (for example) at 7%
and then 2 years (or 20 yrs) later refinance THE principle balance at 5% how is that not a good thing?
If his argument is that you are now borrowing the $ for 32years as opposed to 30 (and hence more interest expense over the full term) then just pay off the refi at an accelerated pace. (i.e. 28 yrs from the date of refi in this example), you'll still be saving because borrowing money at 5% is LESS expensive than borrowing at 7% - but I can not believe this is his point because it is so dumb that it is even beneath him
What am I missing - there is no debate here (is there)
Posted by: fsrg at May 14, 2009 2:54 PM
The conforming limit is $934,200. If you've owned your place about 3.5 yrs, you should still owe approx $953,600. Are you going to have to bring $20K to the table in order to close? What about your 2nd?
It looks like you have about $1.015 million in total debt outstanding secured against your property. $953K @ 6% and $62K @ a variable rate.
Since you total debt is about $80K over the conforming loan limit, you can pretty much forget about consolidated all of that debt at once.
But, $930K @ $5000/month is a great deal. Trying to save another hundred bucks by timing the market probably isn't worth the stress.
Posted by: Colonel Steve Austin at May 14, 2009 2:54 PM
Actually, he is agreeing with you. He is saying Mr. B is WRONG to think the market is bottoming out, just as I did about 3,000 posts above.
However, you are WRONG to think that past mortgage payments have any bearing whatsoever on whether to refinance now. You are absolutely completely wrong, yet you continue to call everyone else idiots and retards who don't agree with you. Yes, lower rates do not always mean you should refi, you have to consider how much longer you expect to be in your house and how much the closing costs are to refi, but past payments are irrelevant.
Posted by: dcorreale at May 14, 2009 2:56 PM
Loan is paid down to $946K and we've also paid off a bunch of that HELOC over time. Keeping the HELOC in place and making up the diff between 946 and 932 with that, so no new out-of-pocket at closing...still happy to be convinced that we shouldn't refi but no one has clearly made that case yet...
Posted by: brownstoner at May 14, 2009 3:00 PM
BTW, we didn't mean to claim that the market WAS bottoming out, just that, assuming you could come up with the downpayment, that carrying the costs of a two-family house in a medium-priced area was getting pretty manageable at these rates...Just said it makes you wonder how low prices can go given those numbers. Not calling the bottom of the market by any means; there's too much crap that still has to work its way through the system first. If you already bought, though, the one way it seems you can take some of the sting out of the falling market is to reduce your own costs of carrying the place.
Posted by: brownstoner at May 14, 2009 3:04 PM
"and then 2 years (or 20 yrs) later refinance THE principle balance at 5% how is that not a good thing?"
Did you know in a 30 year mortgage at year 15 you will only paid 20% if the principle. So for 15 years most of the mortgage is interest and you are not "Amortizing" the mortgage.
Noticed Adam Dahill is missing in action and you know why? He will have to explain my scenario to you and you will understand he makes money by making mortgages and collecting fees. Go into a Bank or a Mortgage Broker and like them show a rate schedule, add on the interest you have PAID and the remaining moths on the new mortgage and get back to me.
Last thing: If you don't or can't believe me then go out and make other people rich. Hey it's your money do whatever the fuck you want.
The What
Someday this war is gonna end...
Posted by: Return of The What at May 14, 2009 3:06 PM
I have absolutely nothing to add to this discussion. However, I do want to mention one thing that really irks me is when brokers pronounce "refi" as "refry" (like refried beans).
Posted by: the chicken at May 14, 2009 3:06 PM
FSRQ;
You are not missing anything. Any investment decision always comes down to the anticipated return looking forward. It's simply a matter of whether the savings in interest costs (discounted for the period of time you intend to remain in the home) justifies the upfront fees (including the mortgage recording tax).
Posted by: benson at May 14, 2009 3:13 PM
Actually, I wasn't disagreeing with what. Nor was I trying to insult him. I was challenging him to put some real numbers up for consideration. Mr. B even went further and put some more data out there. I could see if you are fifteen years into a mortgage that refi'ing to a new 30 might be a bit nutty. I was hoping to see the number on Mr. B. 3.5 years in. Some above say this is irrelevant. Let's see the numbers that say it is.
Here's one thumnail way to look at it:
Old loan = 6k/mo * 12 mo * 26.5 yrs = $1,908,000
Refi = 5k/mo * 12 mo * 30 years = 1,800,000
Assuming these are the exact numbers, which they are not quite, it looks like over the life of the loan, Mr. B saves $108k. Since the principle balance is the same, this is a savings in interest. But, when you consider that Mr. B spends $240k in the last 3.5 years of the new loan, he has really saved more like $350k over the remainder of the old loan period. The downside is all at the back end, which is a long time away and who knows if he will still own the house then. Except that, if he sells at any point, he will have paid off a bit less equity under the refi, and will therefore net less from the sale. But that only partly offsets the savings. And the money he has already spent is a wash because it applies the same in either scenario.
But I am ready to be proven wrong. Show us the money, what. Any of you finance types disagree with the back of this lowly lawyer's envelope?
Posted by: slopefarm at May 14, 2009 3:17 PM
We just refinanced at 4.875, with no points. It was worth it. We'll make up our closing costs in less than two years, and we have no plans to move.
Posted by: Vanderman at May 14, 2009 3:18 PM
"BTW, we didn't mean to claim that the market WAS bottoming out, just that, assuming you could come up with the downpayment, that carrying the costs of a two-family house in a medium-priced area was getting pretty manageable at these rates...Just said it makes you wonder how low prices can go given those numbers. "
Even if it is becoming pretty manageable, what happens if the less-manageable prices in higher-priced area continue to drop? There's also going to be downward pressure from above.
Posted by: Smudge at May 14, 2009 3:20 PM
also refi'd at 4.875, no points.
Posted by: ltjbukem73 at May 14, 2009 3:21 PM
"Assuming these are the exact numbers, which they are not quite, it looks like over the life of the loan, Mr. B saves $108k."
Ok last time!!!!!!!!!!!!!
HOW MUCH INTEREST HAS MR.B PAID FOR 3.5 YEARS???????????!!!!!!!!! OFF THE TOP ABOUT 150,000!!!!!!!!!!!!!!!!!!!!!!! THAT FUCKS YOUR ANALYSIS UP!!!! THE PREVIOUS 3.5 YEARS IN INTEREST PAYMENTS DOES NOT DISAPPEAR!!!! YOU MATHEMATICAL CHALLENGE ASSHEAD!!!
AND HE HAS TO START ALL OVER AGAIN!!!!!! YEAR ONE OF A 30 YEAR MORTGAGE!!!!
The What (WOW!)
Someday this war is gonna end...
Posted by: Return of The What at May 14, 2009 3:26 PM
"BTW, we didn't mean to claim that the market WAS bottoming out, just that, assuming you could come up with the downpayment, that carrying the costs of a two-family house in a medium-priced area was getting pretty manageable at these rates...Just said it makes you wonder how low prices can go given those numbers."
Mr. B, I don't get that at all. Seems your argument is that the "manageability" is mainly a function of low interest rates. If interest rates go up, why WOULDN'T prices go lower? (Maybe monthly carrying costs would not go lower, maybe even go higher if interest rates are high enough, but PRICES would have every reason to go down.)
Posted by: basementalist at May 14, 2009 3:26 PM
"We just refinanced at 4.875, with no points. It was worth it. We'll make up our closing costs in less than two years, and we have no plans to move.
Posted by: Vanderman at May 14, 2009 3:18 PM"
How many mortgage payment have you made???????? How much interest have you paid??? How much is the offset????
The What
Someday this war is gonna end...
Posted by: Return of The What at May 14, 2009 3:28 PM
What...everyone realizes that after year 15 you will have paid off 26% of your mortgage. What is your point? Do you think we don't realize it is not 50%. So you are left with 74% of your mortgage after year 15, $592,000 of an $800,000 mortgage. Guess what, whether your refi or not, it is still $592,000. And if you want to get another 30 year, 15 years later I realize, if you only pay the minimum, you will still have 74% of the $592,000 left on your mortgage versus being paid off. Is this what you are trying to enlighten us with? However, if you take the cash you saved in lower payments and use it to pay principal, you will pay off your mortgage significantly quicker than 15 years
Simple math
Non refi - year 16 of $800,000 7%
$5,322 (monthly payment), $3,454 in interest
Refi - year 16 - 5%
Payment $3,179 per month / $2,467 towards interest
You can put an additional $2,143 towards principal if paying same amount
Thus, in nonrefi, you put $1,868 towards paying down principal each month
In Refi, you put $2,855 towards principal, and this number gets larger more rapidly since you are paying off more principal in this scenario
So, does the extra $1,000 a month in paying principal make up for closing fees. Granted, because of tax deductibility of interest, it is not quite this compelling, but it is still a no brainer
Posted by: dcorreale at May 14, 2009 3:30 PM
What the What ignores is that Mr. B has already paid down some principal in the first three and a half years of his loan. The new loan amount will be lower than his original amount, so although he's restarting the clock, it's for a smaller loan AND at a lower rate. When we refinanced our loan, we had already paid about $40K in principal. So our payments to the first lender were not flushed down the toilet; we are now carrying $40K less in principal over the life of the loan, which will save us a huge amount in interest. And we can pre-pay without penalty, which means we can pay down the loan faster than the 30 year term if we decide to. For now our carrying costs are much more affordable
And no matter what the math indicates, The What needs to take a deep breath and calm down. If these comments are going to create useful dialogue, they should be about bringing more light, and less heat. The What is all about heating things up without being illuminating.
Posted by: Vanderman at May 14, 2009 3:30 PM
What the what is really ignoring is that it doesn't matter what he already paid. He got to live in the house for those 3 years What, do you realize that? he borrowed $1,000,000 and had to pay interest on it. That is how it works, its not like he gave the money away for the right to pay less interest later
Posted by: dcorreale at May 14, 2009 3:34 PM
Excellent use of selective quoting there WHAT -
You are either a complete moron or such an ego maniac that you cant admit that you are mostly wrong.
I vote for both.
Posted by: fsrg at May 14, 2009 3:45 PM
"What the What ignores is that Mr. B has already paid down some principal in the first three and a half years of his loan"
How much principle??????
he new loan amount will be lower than his original amount, so although he's restarting the clock, it's for a smaller loan AND at a lower rate. When we refinanced our loan, we had already paid about $40K in principal.
Is that reflected in the offset?????
"So our payments to the first lender were not flushed down the toilet; we are now carrying $40K less in principal over the life of the loan, which will save us a huge amount in interest. And we can pre-pay without penalty, which means we can pay down the loan faster than the 30 year term if we decide to. For now our carrying costs are much more affordable"
Why not "pay down" from the current mortgage??????
"And no matter what the math indicates, The What needs to take a deep breath and calm down. "
So now we "Throw the math" out of the window???
"What the what is really ignoring is that it doesn't matter what he already paid. He got to live in the house for those 3 years What, do you realize that? he borrowed $1,000,000 and had to pay interest on it. That is how it works, its not like he gave the money away for the right to pay less interest later"
No he rented his house for three years. There was little AMORTIZATION on the mortgage!
Here suck down this concept: Amortization
http://en.wikipedia.org/wiki/Amortization
Amortization or amortisation is the process of increasing, or accounting for, an amount over a period of time. The word comes from Middle English amortisen to kill, alienate in mortmain, from Anglo-French amorteser, alteration of amortir, from Vulgar Latin admortire to kill, from Latin ad- + mort-, mors death.
The goal is to pay off the mortgage not increase the amount of PAYMENTS!
Lord have mercy you are stupid and Brownstoner I will be right here to see of you carry out that 15 year commitment...
The What
Someday this war is gonna end...
Posted by: Return of The What at May 14, 2009 4:02 PM
Chill out, what, please. I'm not angry with you and I am not yelling at you. You do not need to scream in all caps to disagree with me. Yes, Mr. B has paid interest for 3.5 years. We all know that. That money is gone whether he refies or not. It has no bearing on which is the smarter move going forward. He is not taking cash out (actually, he is putting a tiny bit in) so it is not like he is starting from scratch refinancing the original borrowed principle. Your point may have some fiscal logic to it or it may not. If you are right, just put up some numbers and show us. For example, show us how the money paid over the last 3.5 years counts differently in the refi scenario than if he stays woth the original loan. It really is that simple. And if you don't have an argument, just live with it. No need to scream.
Posted by: slopefarm at May 14, 2009 4:08 PM
The What is our own Bill O'Reilly. The less he knows the more he shouts. If the poor dumb #$% wasn't so obnoxious I'd feel sorry for him.
I'm saving nearly a grand a month on my refi. Yes I've extended the loan, but the largest part of the savings isn't through extending the loan it's through a reduced interest rate. Not sure I feel as stupid as l'il Whatty thinks I am.
And while the average length of stay is one thing, individual circumstance is really the issue.
Posted by: Johnny at May 14, 2009 4:09 PM
If you follow the logic of the people talking about the $$ in interest costs to its logical conclusion, then a one year mortgage at 25% is a better deal than a 30 year mortgage at 5% since you pay fewer $$ to the bank. As many have said, what matters is the points, the closing costs and the time to recoup them in interest rate savings.
We are refinancing from a 3 year ARM to a 30 year fixed at 5% (conforming 2 family, no points). The payments will be lower because we are going from a 20 year final maturity to a 30 year final but we are fixing at a good rate and I can't afford the interest rate risk anymore.
For a lot of people, managing monthly cash flow is what matters most, not optimizing your finance structure. Given what's happened to my pay lately, monthly cash savings are what matter.
Posted by: trudylou at May 14, 2009 4:16 PM
"Go into a Bank or a Mortgage Broker and like them show a rate schedule, add on the interest you have PAID and the remaining moths on the new mortgage"
Moths aside, the What is right. You really need to look at the amortization tables to make sense of this. Brokers and real estate lawyers should be able to help.
If Mr. B or whoever else is refinancing can pull out their old mortgage's amortization table (ours was deep in the pile of closing docs), see where you are in the sched. of that loan, and then compare it to the amortization table of your brand-new refi, it should be plain and clear how much money you'll save and how quickly the prior interest paid and second round of closing costs are offset. Rather than all this back and forth, comparing those two tables will tell you exactly whether you'll be better off and by how much.
For Mr. B's numbers, I don't see how they wouldn't work in his favor provided his family stays put for a while.
Dcorreale's mid-term scenario does work if you're strictly using all the monthly savings to pay down the principal, but like he/she said first off, that takes quite a bit of discipline. I know I can't promise I'd do that for the life of our loan, so our calculations were done without plugging the savings back in.
Posted by: petunia at May 14, 2009 4:26 PM
Slopefarm, looking forward... with his current mortgage, Mr. B, has $924,452.31 in Interest Payments remaining over the next 26.5 years.
If he were to refi today @ 5% he would have to make a total of $882,335.24 in Interest Payments over the next 30 years; a savings of $42,117.07 in interest. So only looking forward(the past is the past), he would be better off re-fing today.
Now if he waits 12 months and rates are still 5%. His remaining balance would be $930K. On his old loan, he will have $868,108.01 in Interest Payments remaining. The new loan would have $867,785.70 in Interest Payments; a savings of $322.30 in interest. Looking 12 months into the future, the benefits are not as apparent. Rates would have to be lower than they are today to make it worthwhile. And not worth the stress.
If he waits 24 months and rates were still 5%. His remaining balance would be $913K. On his old loan, he would have $812,725.98 in Interest Payments remaining. The new loan would have $852,338.78 in Interest Payments; an Increase of $39,612.80 in interest.
So if he's gonna so something, the sooner the better. Unless he knows for sure rates will be lower in the future.
http://mortgages.interest.com/content/calculators/recoup.asp
Posted by: Colonel Steve Austin at May 14, 2009 4:34 PM
Thanks for that definition of amortization what, it has really cleared everything up for me :) But you are right, I am an idiot, because I just spent the better part of a day trying to convince you of some very simple math, the same math you profess is behind your logic. Oh well, it was fun
Posted by: dcorreale at May 14, 2009 4:35 PM
Petunia, even if you are not disciplined, you still have extra cash. If you want to go spend it on Disney World every year, then so be it, and if you want to invest it instead of paying down your mortgage, again, to each his own. But the fact remains you have more cash in your pocket instead of in the banks
Posted by: dcorreale at May 14, 2009 4:37 PM
Anybody have an intelligent opinion about whether I need a real estate lawyer for my refinance?
Posted by: MR at May 14, 2009 4:37 PM
Hello MR, I did use a lawyer to refinance because I didn't want to pay mortgage tax again. the mortgage tax would have been $6,000, the lawyer fees were $800. It added some time and complexity, and we used all 60 days of the rate lock, but it was definitely worth it moneywise..
Posted by: Maly at May 14, 2009 4:44 PM
If you wanted to get cash out in a refi to do some repairs etc., can you refi for the original loan amount and not pay additional fees (e.g. mortgage recording tax) on the difference between your current balance and the original loan amount? For example, if your original mortage amount is 600K, and when you refi your balance is 540K - if you refi for 600K, do you pay additional fees on the 60K difference between the original loan amount and the current principal amount?
Posted by: 1842 at May 14, 2009 4:47 PM
What-
I am not absent. I am busy working all day. You insult me on posts and now you want me to back you up?
If you can recoup your closing costs before you leave/sell/die etc... anything beyond that is savings. It depends on how long you live there if it is worth your while.
I have some transactions with clients are recouping their costs within 1 year and saving over 1k per month. A lot of people in this stage of the game are not interested in paying off the mortgage, it's a tax strategy. I suggest people speak with their accountants and make an informed decision.
Just today I spoke to 2 brownstoners and we realized that it didn't make sense for them to refinance. They agreed with me.
It's all about what you are looking to get out of your mortgage. Some people need the lowest payment available and moving to a 30yr amortization gives them that as well as a low fixed rate. Others are in ARMs and currently ARMs are adjusting lower, but that will not last and they are converting to a fixed rate. Others need cash out to consolidate high interest debt, or to pay for college and now is a good time to fix those payments with Gov subsidized rates.
Differnt strokes for different folks
Posted by: Adam Dahill at May 14, 2009 4:48 PM
1842, yes, you do have to pay the mortgage tax on any extra fund you take above the amount you currently owe.
Posted by: Maly at May 14, 2009 4:51 PM
Thanks Maly, I thought that was the case...
Posted by: 1842 at May 14, 2009 4:58 PM
I haven't read any of the comments but want to respond to Mr. B's suggestion that low rates mean prices should be bottoming, which I think completely misses the mark. Prices are dropping in the lowest interest rate environment we have ever seen. What do you think is going to happen when rates go back up, which they will? If ridiculously low rates have only slowed the decline and not stopped it, wait until rates go up.
le(live from Buenos Aires)chacal
Posted by: lechacal at May 14, 2009 6:01 PM
The lawyer that did the CEMA was the bank attorney. MR, don't hire a separate real estate lawyer for a refinance, you have to pay the bank's lawyer and he will be doing the CEMA for you.
Posted by: Adam Dahill at May 14, 2009 6:02 PM
IronBalls, more details please. What neighborhoods, what rents, what do you believe will happen in the future?
And I'm curious what you think will happen with the subprime areas. Right now we're counting on $1400 for a two or three bedroom rental (this is already down from $1600 rent in March). Otherwise we couldn't afford to buy. (Houses are only $430,000 or so.)
This is Bushwick/Bedstuy/etc.
See what I mean?
Posted by: mopar at May 14, 2009 6:45 PM
What:
I never considered myself a die hard member of team bull or team bear...i try to be somewhat objective...despite equities rallying i'm not feeling the over-all CNBC/Obama induced love that the general population feels towards the economy or SPX or even real estate....but i gotta ask...why r u such an incredible asshole ?? why r u so fucking miserable?? why don't u just rent? or short banks? or short real estate? or jump off the bklyn bridge? --THE WHAAAAAT...SOMEDAY I"M GONNA GET A LIFE !!!!! jagoff
Posted by: bklyn14 at May 14, 2009 7:46 PM
I'm willing to bet that Brownstoner will not go thru with his refi cause he looked at the numbers and he realizes that everything is OK now. He will just raise his family and pass his legacy on to his children..
The What
Someday this war is gonna end...
Posted by: Return of The What at May 14, 2009 8:18 PM
hey What,
Why are you so pissed off????
Posted by: Ben Gazi at May 15, 2009 8:49 AM
"we didn't mean to claim that the market WAS bottoming out"
But ya did. Whoops!
"What do you think is going to happen when rates go back up..."
Prices will be making distress calls, "MAYDAY MAYDAY!!!"
***Bid half off peak comps***
Posted by: Brownstones Half Off at May 15, 2009 9:29 AM
Mopar,
The decline in rents is happening across the city.
I'm not familiar with rents in Bushwick, but I guess worst case you can count on Section 8 as long as your rental apartment is up to code.
The bottom line is that in the most desirable areas there's a giant disconnect between rents and mortgage payments that is not sustainable. Prices have a long way still to fall before there's even a semblance of parity with current rents.
It sounds like the purchase prices in Bushwick are so low, maybe buying there isn't such a bad idea, especially since you'll be living on site, but to be honest, low income neighborhoods tend to be difficult places to make money as a landlord, and I don't invest in them because of rent collection issues.
Posted by: IronBalls at May 15, 2009 10:02 AM
Mr. B,
What is your LTV? I am refinancing with Chase too and can't seem to get better than 7/8th of a point with similar building to yours. My banker there insists I have the best possible rate and was surprised your points were so low. I am also a premier platinum customer.
Thx for sharing! gowanusgus at gmail.com!
Posted by: gowanusgus at May 15, 2009 11:43 AM
Thanks so much, IronBalls.
Curious: Do you think there is a disconnect between rents and mortgage payments in places such as Park Slope, Cobble Hill, etc.? I mean right here on this board (in this thread!) we have Jon, Wasder, etc., saying the $3500 or so they pay for their duplexes or triplexes is the same or less than they'd pay to rent an apartment and they get twice as much space. (That's exactly what we're thinking in Bushwick except we pay $1600 in rent and don't want to pay more to own.)
Also, very curious about Section 8. How does it work? Someone on this board said if you accept Section 8 once you are obligated to always rent to Section 8. Is this true?
Thanks!
Posted by: mopar at May 15, 2009 12:27 PM
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Le Barricou
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Cousin John's Café & Bakery
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