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…
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?
“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…
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. . .
christopher: That is a real nice looking home. But I doubt you can get it for 1.4 maybe closer to the asking price.
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
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.
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!
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.
“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…
“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.