How low can we go? 30 yr fixed at 3.75% with no fees...
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sgip
Well-known member
Cash out investment Loan Level Price Adjustment (LLPA) hits aren't as terrible when using a Non-Conforming fixed rate product compared to a Conforming or High Balance Conforming.
Assuming a 70% LTV transaction, Standard Conforming price hits are +2.125 for Non-Owner, .625 for cash out, .25 for LTV to 70% - 3 points total to price - pushing a 3.x rate handle into the mid to upper 3's to reduce the point cost.
The High Balance Conforming LLPA's add 1.0 point to the 3.0 already being charged. This makes it very difficult to structure a zero point rate that is reasonable.
A $1.00 over Standard Conforming jumbo cash out has an LLPA between .875 and 1.25%, however Non-Conforming rules sometimes prevent the self employed or multiple rental property owners refinance due to risk perception. At least you can still get a cash out refinance at a decent rate using something other than a High Balance Conforming loan.
My .02c
Assuming a 70% LTV transaction, Standard Conforming price hits are +2.125 for Non-Owner, .625 for cash out, .25 for LTV to 70% - 3 points total to price - pushing a 3.x rate handle into the mid to upper 3's to reduce the point cost.
The High Balance Conforming LLPA's add 1.0 point to the 3.0 already being charged. This makes it very difficult to structure a zero point rate that is reasonable.
A $1.00 over Standard Conforming jumbo cash out has an LLPA between .875 and 1.25%, however Non-Conforming rules sometimes prevent the self employed or multiple rental property owners refinance due to risk perception. At least you can still get a cash out refinance at a decent rate using something other than a High Balance Conforming loan.
My .02c
A question. While we have such appreciated high prices for our homes at the moment, would it make sense to do cash out refi? If we can do so while keeping the same or close rate (or even lower?), then why not? I know it reduces the principal amount if we sell the home, but if we're not planning to sell our homes right away and may be thinking of move up in 10 years or so, it might be a good option to enjoy this appreciation. If the home prices ever go down, we at least took the appreciated cash in our pocket. Thoughts?
irvinebullhousing
Well-known member
Depends.
Are the capitals will be use to acquire assets producing income?
Will this offset the additional debts incurs?
Or is it for make me feel good?
Are the capitals will be use to acquire assets producing income?
Will this offset the additional debts incurs?
Or is it for make me feel good?
sgip
Well-known member
I wouldn't.
Best to take out a low to -minus margin HELOC as available dry powder. Qualifying is easier, you don't disrupt your 1st TD's amortizing, and you aren't paying interest on money you really aren't using. I'd expect a 2-3 interest rate, but are you guaranteed a 4-7 return? The key word is in bold....
Best to take out a low to -minus margin HELOC as available dry powder. Qualifying is easier, you don't disrupt your 1st TD's amortizing, and you aren't paying interest on money you really aren't using. I'd expect a 2-3 interest rate, but are you guaranteed a 4-7 return? The key word is in bold....
irvinebullhousing
Well-known member
Soylent Green Is People said:
I would follow SLGP here.
Soylent Green Is People said:
Like I mentioned before though, a HELOC can cause issues for future refinances unless it is closed or subordinated.
I have had clients who did a large cash out refi and then in 6 months refinanced the loan again to a lower non-cash out rate. Of course we were in a market that had rates decreasing unlike today.
usctrojancpa
Well-known member
Because of the large loan amount that I'm looking at I'll need to put 25-30% down for my purchase but then I'll just open up a HELOC back up to 80% LTV to have the access to capital.
Second home and High Balance loans are getting hefty LLPA adjustments for loans sold to FHFA after 4/1/2022.
Announcement:https://singlefamily.fanniemae.com/media/30326/display
Before and after LLPAs (page 3-4):https://singlefamily.fanniemae.com/media/9391/display
Second homes are getting anywhere from 1.125% to 3.875% point increase on loans. At the higher LTV levels this effectively will be the same as an investment property now.
High balance loans are getting between 0.25% to 0.75% point increase. A high-balance LLPA will not apply if any borrower on the loan is a first-time homebuyer and total qualifying income of all borrowers is less than or equal to 100% of the applicable area median income limit for the subject property?s location.
100% of area median income (AMI) in LA and OC counties are $86,100. So in order to avoid this rate hit you need to make less than this amount combined.
Announcement:https://singlefamily.fanniemae.com/media/30326/display
Before and after LLPAs (page 3-4):https://singlefamily.fanniemae.com/media/9391/display
Second homes are getting anywhere from 1.125% to 3.875% point increase on loans. At the higher LTV levels this effectively will be the same as an investment property now.
High balance loans are getting between 0.25% to 0.75% point increase. A high-balance LLPA will not apply if any borrower on the loan is a first-time homebuyer and total qualifying income of all borrowers is less than or equal to 100% of the applicable area median income limit for the subject property?s location.
100% of area median income (AMI) in LA and OC counties are $86,100. So in order to avoid this rate hit you need to make less than this amount combined.
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The Motor Court Company
Well-known member
welcome sign to cool off the hot market....now need to regulate investment homes?
sgip
Well-known member
With the amount of occupancy fraud going on today, it's surprising that it's taking this long to reign in the second home market. The High Balance changes are on the one hand a mystery - who can qualify at median income???? Puh-leeez. This is a fig leaf for a covering reason more than anything else. My theory is that the Agencies want to push risk to the Banks or Non-QM lenders. If values fall, they will be the ones taking the hit, not FNMA/FHLMC.
As for investment property reform, if the Agencies AND the Banks were limited to 3 Non-Owner Occupied loans (4 total including Primary) purchase or refinance, significantly reduced tax breaks on investment property, and made it next to impossible for SFR REITS (https://seekingalpha.com/article/4411292-single-family-rental-reits-burbs-are-hot) and other corporate structures to profitably own rental SFR's, then and only then you'll see some re-balancing of housing stock. There are plenty of homes to buy - if they were put on the market, but landlords have no incentives to do so. If there was a 1 time capital gain exemption of real significance, my guess is that many rentals would sell. If they don't, and if prices were to decline, these kind of tax law changes might represent a missed opportunity for sellers to get out while they were ahead.
My .02c
As for investment property reform, if the Agencies AND the Banks were limited to 3 Non-Owner Occupied loans (4 total including Primary) purchase or refinance, significantly reduced tax breaks on investment property, and made it next to impossible for SFR REITS (https://seekingalpha.com/article/4411292-single-family-rental-reits-burbs-are-hot) and other corporate structures to profitably own rental SFR's, then and only then you'll see some re-balancing of housing stock. There are plenty of homes to buy - if they were put on the market, but landlords have no incentives to do so. If there was a 1 time capital gain exemption of real significance, my guess is that many rentals would sell. If they don't, and if prices were to decline, these kind of tax law changes might represent a missed opportunity for sellers to get out while they were ahead.
My .02c
Liar Loan
Well-known member
Interest rates are headed back to early pandemic levels.
Mortgage rates hit their highest point since May 2020
The problem is, this information is already outdated. Rates have gone even higher since lenders were surveyed just last week.
Mortgage rates hit their highest point since May 2020
https://www.nationalmortgagenews.com/news/mortgage-rates-hit-their-highest-point-in-9-months
The problem is, this information is already outdated. Rates have gone even higher since lenders were surveyed just last week.
I think there was a good portion of homeowners using 2nd home loans and short term rentals to skirt investment property occupancy. Whether or not this is significant I don't know but I know it was happening.
And yes rates were already at 52W highs during the end of 2021 and it's gone even higher. I think around 1% from the lowest for interest rate.
And yes rates were already at 52W highs during the end of 2021 and it's gone even higher. I think around 1% from the lowest for interest rate.
irvinebullhousing
Well-known member
I like to see it hit 5 or low 6%