Archives for September 2007

Question from a reader: Are the 30 year fixed interest only fixed for the full 30 years?

September 5, 2007 by Leave a Comment

The answer is yes, the rate is fixed…BUT… The rate is fixed for 30 years however depending on if you select the 10 year or 15 year interest only period, once the interest only period is over, the mortgage will be amortized at the same rate for the remainder of the term.

For example, let’s assume your mortgage balance is $350,000 and the rate for the 30 year fixed with interest only payment is 6.50%.

The interest only payment is: $1895.83

If you have the 10 year interest only product (usually a slightly better rate), the payment will adjust to a fully amortized mortgage based on the remaining 20 year term.   The new payment would be:  $2609.51

If you opt for the 15 year interest only product, the fully amortized mortgage based on the remaining 15 year term  be:  $3048.88

Both of the above scenario’s are assuming that there are no additional payments made towards the principal during the interest only period.   NOTE:  borrowers may need to qualify at the fully amortized payment (not the interest only payment).

Here is the email from the reader:

"Currently, we have a subprime loan with a 2-year penalty which expires  March 2008. We were told that it is a 40 year fixed at 8.83% and if we refinanced prior to the 2-year penalty expiration date, there will be a 6-months of interest penalty. However, we recently reviewed our loan documents and with a better understanding called the lender. The lender confirmed that we have a subprime loan and the rate will be adjustable after the two years.

We are considering the 30-year fixed, 10 year interest only, but want to be sure that the rate is definitely fixed for the full 30 years. We are in our mid-40s and have no intentions of selling our home, and consider this home to be our retirement home. From your financial expertise, do you think this is a good option for us?"

It’s difficult to provide advice for someone when you don’t have their entire financial picture.   This couple does not live in Washington State (where I’m licensed to practice).   

Here are factors that I would consider if I were their Mortgage Professional:

  • How much funds do they have currently reserved for their retirement?  (With their current loan being subprime, I’m assuming they are underfunded.   Most Americans are).
  • What do they anticipate their retirement income to be in 20 years?
  • How is the appreciation/depreciation in their current region and with their home?
  • In 20 years, when they retire and their income is different, can they afford the 20 or 15 year amortized payment? 
  • Are they needing the interest only payment to make current ends meet?
  • What are their financial goals for retirement?  To have no mortgage?  To be debt free?   To hang onto their house with the mortgage as a tax favored debt? 

I would caution against doing "band aid" loans that will need refinancing when you’re at retirement or close to then.   Depending on what you anticipate your income to be, should you need to refinance out of a 15 or 20 year term mortgage because your income is less, you may not be able to qualify.   You may want to consider a traditional 30 year fixed or a Fannie Mae or Freddie Mac 40 year fixed rate (without the balloon or adjustment that you have with your current mortgage).

Here are the rates I quoted last Friday (just to give you an idea of how these rates may vary from product to product):

30 Year Fixed: 6.125% (APR 6.281%).  Payment per $1000 = $6.08.

30 Year Fixed with 10 Year Interest Only:  6.500% (APR 6.653%).  Payment per $1000 = $5.42.

40 Year Fixed:  6.500% (APR 6.646%).  Payment per $1000 = $5.85.

I give them huge kudo’s for reviewing their loan documents and contacting their lender and for getting second opinions.   Their Mortgage Professional should review all possible mortgage options with this couple and make sure they understand the terms and any consequences. 

Filed Under: Financial Planning, Mortgage, Refinance

This is sure to trigger your anger

September 5, 2007 by Leave a Comment

I just received this email:

Dear Mortgage Brokers,

This notice is to inform you that our 24 Hour Mortgage Trigger Database has recently been updated. This means that we are able to offer you data from either:

Equifax, Experian or Trans Union

Our leads come with:

FICO, Name, Address, Phone Number, Amount of Aggregated Revolving Debt, Mortgage Loan Amount, Lender Name, Loan to Value, Monthly Payment on Mortgage – Credit Cards – Automobile

We can target all 50 states by: County, Zipcode, Zipcode Radius, City & Major Metropolitan Area.

Response within 24 hours is required to guarantee this price.

Give me a call and I can have you setup to get leads the same day."

When  you visit their website (I’m not promoting here), they offer:

"… specific credit information on consumers based on actual credit records. This database covers 50 states and over 300 million people. From this database, selections can be made on credit score, amount of debt, late payments, mortgage type and monthly payments. This data is primarily used to identify individuals based on their current credit situation and purchase indicators."

If President Bush really wants to stop predatory lending , or as he said last week regarding Loan Originators “if you’ve been cheatin’ somebody, we’re gonna find you.”   Perhaps he could start by not allowing the major credit bureaus from reselling the (currently not so) private information of consumers.   

In the meantime, I highly encourage you to write to your elected officials to tell them to stop "trigger lists".   There is NOTHING good about this practice.

Filed Under: Credit Scores and Reporting, Identity Theft, Legislation, Predatory Lending

Please don’t keep me a secret!

September 4, 2007 by Leave a Comment

Secretl

One of my past clients contacted me about refinancing their existing mortgage.   In a nutshell, I advised them to consider not refinancing their mortgage at this time.   They replied something to effect of:

“Not many loan officers would recommend “not refinancing”.   We appreciate your advice and we’ll keep you our little secret.”

I’m thankful they contact me when ever they have a question about their mortgage planning.   Typically my relationship with clients is just beginning once they’ve closed on their new mortgage.    In fact it’s my goal to provide such a high level of service that my clients feel compelled to refer me to their friends, family, co-workers…anyone they know who is considering buying a house, refinancing or in need of a home equity loan.

Although it’s available at my office, I do not take “up calls”.   All of my clients are either referred to me from past clients, professionals (such as real estate agents, financial planners and CPAs) or from reading my blogs.

During these times, with major lenders facing uncertain times, it’s more important than ever to select a Mortgage Professional based on their skill, knowledge, ethics, dedication and available mortgage programs.    Shopping by rate alone will cost people big  in the long run if the lender cannot perform.

I probably don’t ask for business or referrals enough…so since my client reminded me that if I don’t, they WILL keep me a secret…I thought this is the perfect opportunity to remind you that I am here to provide mortgage advice and programs.   I only receive income once a transaction has successfully closed.

Blogging is something I’m passionate about and I’m so pleased for my readers and the kudos Mortgage Porter has received.    I do not sell ad space like you’ll find on other blogs…this is a just labor of love that I hope you find helpful in your quest for information about the murky world of mortgages.

Please don’t keep me a secret.

Filed Under: Misc.

Mortgage Master is closed today

September 3, 2007 by Leave a Comment

In honor of Labor Day, Mortgage Master is closed today.   We will re-open for business as usual on Tuesday, September 4, 2007.

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Enjoy your day off celebrating the "working man"!   This Labor Day, I think we’ll be grilling up some Turkey Burgers…hey they’re not that bad!  In fact, they’re darn good.   

Here’s my recipe:

  • Ground Turkey
  • Sauted onions and garlic (cool before mixing) in olive oil
  • Bread crumbs (add enough so that you can form patties, but not too much where it’s dry)
  • Dash of basil, oregano, salt and pepper (I like smoked sea salts, but regular sea salt will do).
  • If you’re making chipolte sauce (recipe follows) add a little bit of the sauce from the chipolte can or add a little bbq sauce.

Form patties and grill until cooked through.   This is turkey, not beef, so you do want these burgers cooked through.  I like to top mine with slices of pepperjack cheese, lettuce, tomatoe and grilled onions and with Chipolte Sauce (recipe follows).

Chipolte Sauce

  • 3/4 cup mayo
  • 2 T. olive oil
  • 2 T. sweet onions or green onions
  • 2 T. dill
  • 1 T. minced canned chipoltes (these are hot and smokey)
  • 1 T. capers drained.

Mix it up and put it in the fridge until you’re ready to use with your Turkey Burger.  BTW, this is awesome with fries!

Filed Under: Recipes

Looking for something to do?

September 2, 2007 by Leave a Comment

How about checking out all of the post nominated for The Peoples Choice Award at Bloodhound Blog.   I am very honored that an article I wrote at Rain City Guide: What is Your Mortgage Exit Strategy is in "the running".   

You have until Monday at 12:00 PDT/MST to vote for your favorite one.

Filed Under: Weblogs

Announcing “The Mortgage Porter” Quarterly

September 2, 2007 by Leave a Comment

My quarterly newsletter, Homes and Land, has undergone some minor changes.  It is now "The Mortgage Porter".   The latest issue is just back from the press and is being prepared to be mailed to my clients.   If you would like to be on the distribution list, please let me know.

With every issue, I remind readers to use one of the bureaus at www.annualcreditreport.com to pull your free report (you’re allowed one free report from each bureau annually).   With this issue, I recommend that you select Transunion.

Filed Under: Mortgage

Washington homes still show appreciation, BUT…

September 1, 2007 by Leave a Comment

We are lucky that Washington state is one of the few in the nation to still be reporting that our homes are appreciating.  BUT…please don’t let that allow you to have a false sense of security with the value and equity in your home.   These reports are based on information that lag month(s) behind what’s actually going on. 

Other reports show that we are at a 16 year high for unsold homes (listings).   With this much inventory and few buyers due to a reduction in available mortgage programs (subprime, alt-a are reduced if not nil and jumbos have higher rates than before August), we may very well see a change in the appreciation stats we have been benefiting from.     The Seattle/Bellevue area has a high rate of "jumbo" priced homes (jumbo mortgages are loan amounts higher than $417,000).

If you currently have an ARM or bought your home with 100% financing a few years ago, you need to check with your Mortgage Professional to see how your credit is and what actions you should take (if any) right now (even if your ARM is not adjusting for two years).

Consider how you would be impacted if:

  • Your home value does not appreciate and instead, the value stays the same (stagnant) or depreciates?
  • Your adjustable rate or balloon mortgage adjust and you cannot afford the new payment?
  • Your interest only feature on your mortgage is over and you now have to make a fully amortized payment?
  • Your home does not appraise high enough to have the loan to value required for a refinance (loan to value guidelines are more strict now.   FHA has one of the best programs allowing a 95% LTV.  However, loan limits apply).

I don’t want to sound like a "Chicken Little" or cause panic.  I do want to make sure that you’re prepared for worse case scenario and hopefully it doesn’t happen.  Maybe Seattle will get away with just getting bumped by the national housing bubble.    Who knows?

Appraised values are based on what other homes like yours in your neighborhood recently have sold and closed for — not trends and not what other homes in your area are listed for.   If homes are selling for less because there are fewer buyers, this will directly impact your loan to value should you need to refinance out of a non-fixed rate mortgage.

Many home owners with prime and subprime ARMs that will be adjusting over the next few years will see their payments increasing from 20-50%.   It is your responsibility as a home owner to know your mortgage and to be fiscal and credit wise.     Please do contact your Mortgage Professional today (I know I’m repeating myself…but it is that important) to develop your personal "Mortgage Exit Strategy".  The more time you have to prepare, the better off you should be.

Filed Under: Jumbo/Non-Conforming, Mortgage, Real Estate, Seattle
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