refis in q1 reduce payments by $2.5b in 2009

dave_donhoff

17 years ago

REFINANCES IN FIRST QUARTER REDUCE MORTGAGE PAYMENTS BY $2.5 BILLION IN COMING YEAR

http://www.freddiemac.com/news/archives/rates/2009/1qupb09.html

PARTICULARLY interesting is the data table provided...

Dave Donhoff

Leverage Planner

Here is a link that might be useful: REFIS IN Q1 REDUCE PAYMENTS BY $2.5B IN 2009

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Comments (3)

dave_donhoff
Original Author
17 years ago
Ballast
devorah
17 years ago
Wait - let's not add the ballast quite so fast. I have been shy about asking you this Dave, partly because I hate to impose on your time and partly because I have to reveal what a dork I am.

Last fall when we bought first one and then a second triplex, I asked about the mortgage broker's fee because that was something new to me. I still wonder about it because the American Trust mortgage broker I dealt with found me a mortgage through American Trust Mortgage who sold it to American Trust Bank. Seems awfully convenient. Fees were at the top end of what I understood to be usual, and I am a little reluctant to deal with these people again

But, I read in the paper that rental properties up to a triplex in size could also benefit from refinancing. I don't know how to approach this. I am paying about 7 1/2% because these are not owner occupied. I am not sure that I can afford to pay all the fees again that I paid last fall. I don't even know where to begin to investigate this since I am in a different state. Could you give me an idea of how to begin to see if this is something that would be beneficial to me?
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Hi Muddbelly, Sorry to hijack here saphire, but Dave - where do you think rates will be after those 2-3 years (say late 2009)? Well... while my crystal ball is a little foggy, and I let the insurance on it lapse..... I believe that mortgage interest rates are going to remain flat, within a range of roughly 1/2% of where they are today, for a long, long time. If you have 5% for another 28 months, I would recommend leaving that alone, and making hay while the sun shines by aggressively stuffing every additional discretionary dollar you can into your tax-deferred and tax-free retirement vehicles. Hi Cmarlin, (I think you jumped threads (this is from elsewhere, no?...) but I'll answer here nonetheless.) I am also considering buying a 4 unit bldg (not owner occupied) I also do not have verifiable income. I live on investments, so there is a history, but I do not have much income on my tax returns. OK, you need to qualify using a special program process called "Self-Employed Investor, Stated Income." Does the lender look at the bldg as they do on larger multi-family, will the rate be better if I do not go above a four unit as opposed to a larger mix. Yes... both rates and terms are preferential at a 4-unit level than at 5+ units. I have good Ficos and about 50% down. Will I have a problem getting a mortgage? You shouldn't... at 50% down it ought to fly through OK. Cheers, Dave Donhoff Strategic Equity & Mortgage Planner
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What I understand from reading the fine print is that 6 months after you take out the loan, you can extend it for another 5 years at the best rate. So by the end of 2009 you could have basically a 10-year loan in place. Rates may or may not be this low for the rest of the year, but I don't expect them to go up dramatically. Whether that second 5 years is amortized over 30 years or not, I don't recall, but that would be a pretty small point, wouldn't it? I was considering this because we have refinanced twice in the past 10 years.* I was wondering if we really would keep another loan in place for 5 years, let alone 30. Our goal is to set aside enough cash over the next 10 years to pay off the balance -- when we have that, we can decide if it makes sense to do so at that time, but it would be an option. Also, I don't know if we will even stay in this house more than 10 years -- but time can go by before you realize it. I would like to take Dave's advice and find a mortgage broker. That seems like the way to go. But it's not that easy figuring out where to start, and in the meantime, rates are ticking up a bit. *First time: we went to a 15-year loan at the then-amazing rate of 5.125. After a few years of paying those high payments and putting the max into retirement accounts, we had no liquid cash. So for the second refinance, we went to a 30-year loan at 6.125. This has been working out well for us. Refinancing now at the current low rates would obviously allow us to retain more cash, but we can certainly manage as we are. I still remember when I bought my first house in 1993 and the 7.25% loan seemed really great.
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dave_donhoff
Original Author
17 years ago
Hi devorah,

You are DEFINITELY NOT a 'DORK' (unless you mean that in an endearing way... which I fully embrace myself ;~)

7 1/2% because these are not owner occupied.

HIGHLY likely you can get that dropped sufficiently enough to have the deal make sense.

I am not sure that I can afford to pay all the fees again that I paid last fall.

I'd suggest looking first at whether there is any way to have the properties themselves pay for their own leverage refinancing from equity... then their own operating income will cover their costs, *and* the monthly savings from the interest reductions will "catch up to break even" on the initial costs against equity.

With primary residences the maximum breakeven point is usually best-advised at 3-5 years, simply because of the statistical realities of people's "life happens" creating unforeseen reasons to move (and thus sell.)

With rental income properties... *ESPECIALLY* self-supporting non-local properties, the unforeseeable "emotional" causes of a forced sale drop dramatically, and the statistical longevity of ownership stretches out, so that a significant reduction in carry costs (dropping the payments, increasing the operating positive cashflows) can make much more sense even when the breakeven on the refi takes longer.

I don't even know where to begin to investigate this since I am in a different state. Could you give me an idea of how to begin to see if this is something that would be beneficial to me?

I'd suggest working with a nationally licensed advisor (or at least one licensed in all the states you are concerned about,) preferrably one with investment property experience themselves. Of course, shamelessly, that describes ME on point... but there are certainly others (not many... but there are ;~)

Cheers,
Dave Donhoff
Leverage Planner

refis in q1 reduce payments by $2.5b in 2009

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dave_donhoff
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devorah

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refis in q1 reduce payments by $2.5b in 2009

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devorah

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