Is it possible to get a 5.8 30 year fixed?

NEW -> Contingent Buyer Assistance Program
graphrix said:
I think that just proves we can never thank BK enough.
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So true!

freedomCM said:
#2 depends on how long you hold, no?
Click to expand...

Sooooo ripe for a potty joke, but I'll resist the temptation.

What is the time value of money? If you're getting a loan for 6%/year, that's what money's worth to you and to the lender. If you run the numbers on paying points, you'll likely find it's worth it to do so from a financial standpoint. Paying out of pocket doesn't make sense if you're going to sell the place within a few years, but consider rolling the points into the loan. Eg: Get a $400k loan with no points @ 6.125%, and the payment is $2430/month. Perhaps you can pay $20k to get a loan @ 5.125%. Roll the $20k into the loan, and the payment is $2287/month. Not only that, but you'll have more of each payment going toward principal with the 2nd loan over the first in the early part of the loan term. If you were to sell after 5 years, you would have $4827 more equity with the 2nd loan, though your annual tax deductions would be less.
 
Daedalus said:
graphrix said:
I think that just proves we can never thank BK enough.
Click to expand...
So true!

freedomCM said:
#2 depends on how long you hold, no?
Click to expand...

Sooooo ripe for a potty joke, but I'll resist the temptation.

What is the time value of money? If you're getting a loan for 6%/year, that's what money's worth to you and to the lender. If you run the numbers on paying points, you'll likely find it's worth it to do so from a financial standpoint. Paying out of pocket doesn't make sense if you're going to sell the place within a few years, but consider rolling the points into the loan. Eg: Get a $400k loan with no points @ 6.125%, and the payment is $2430/month. Perhaps you can pay $20k to get a loan @ 5.125%. Roll the $20k into the loan, and the payment is $2287/month. Not only that, but you'll have more of each payment going toward principal with the 2nd loan over the first in the early part of the loan term. If you were to sell after 5 years, you would have $4827 more equity with the 2nd loan, though your annual tax deductions would be less.
Click to expand...

The next time I need to split a restaurant tab, I'm calling Daedalus.
 
Daedalus said:
What is the time value of money? If you're getting a loan for 6%/year, that's what money's worth to you and to the lender. If you run the numbers on paying points, you'll likely find it's worth it to do so from a financial standpoint. Paying out of pocket doesn't make sense if you're going to sell the place within a few years, but consider rolling the points into the loan. Eg: Get a $400k loan with no points @ 6.125%, and the payment is $2430/month. Perhaps you can pay $20k to get a loan @ 5.125%. Roll the $20k into the loan, and the payment is $2287/month. Not only that, but you'll have more of each payment going toward principal with the 2nd loan over the first in the early part of the loan term. If you were to sell after 5 years, you would have $4827 more equity with the 2nd loan, though your annual tax deductions would be less.
Click to expand...

Good tip.

Here's another gem: You should offer to pay for seller's closing costs.

Read carefully.

Say you've negotiated and are very close in terms to purchasing a home for a $1M strike price.

For our purposes, say the seller is going to net $1M less 6% commission and about .75% more (generalized escrow and title insurance fees).

Net cost to you $1M. Net gain to seller would be $932,500.

If you offer to cover up to $60K towards sellers recurring and non-recurring closing costs, try the numbers again.

Since they are based off of percentages, the closing costs come down by $4050.

Offer $936K plus said $60K.

Seller sees same bottom line (actually $320 more). Net cost to you, though, has dropped by $4000 just by restructuring.

Other fringe benefits:

Appraisal: slam dunk

Taxes: save $600+/year, every year

Downside:

Your new neighbors hate you for busting their value. Blame the market.

Where did that $4000 go? You've just trimmed the fat and taken advantage of a %-based system.

Hey wait, come to think about it, that's coming outta my paycheck... forget I ever wrote this.
 
EvaLSeraphim said:
[The next time I need to split a restaurant tab, I'm calling Daedalus.
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:red: I realized after I posted I made a big mistake, but I was too lazy to get out of bed. When you sell does matter. In my example I neglected to take into account the outstanding principal of the $20k in points. In this case it takes about 10 years to get the balance of the $20k back in the form of (present value) of reduced monthly payments and increased principal.
 
You are right!! Mello Roos is when the toilet is directly over the foyer or entry door. SMello Poos is when the burner is directly under the toilet. Never buy a house when the toilet is over a bed, burners, entry, and dining table.

graphrix said:
bkshopr said:
Hey Graph, What is Mello Roos?
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Duh... Mello Roos is when the burner is underneath the master bedroom bed, and it creates bad feng shui. Sheesh, you would think you would know this.
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bkshopr said:
You are right!! Mello Roos is when the toilet is directly over the foyer or entry door. SMello Poos is when the burner is directly under the toilet. Never buy a house when the toilet is over a bed, burners, entry, and dining table.

graphrix said:
bkshopr said:
Hey Graph, What is Mello Roos?
Click to expand...

Duh... Mello Roos is when the burner is underneath the master bedroom bed, and it creates bad feng shui. Sheesh, you would think you would know this.
Click to expand...
Click to expand...

Uh-oh, I think I might have a toilet over my entry area. What should I do bk?! Is there a Feng remedy?! Can I move a plant or hang a crystal or something? :)
 
IrvineRealtor said:
Daedalus said:
What is the time value of money? If you're getting a loan for 6%/year, that's what money's worth to you and to the lender. If you run the numbers on paying points, you'll likely find it's worth it to do so from a financial standpoint. Paying out of pocket doesn't make sense if you're going to sell the place within a few years, but consider rolling the points into the loan. Eg: Get a $400k loan with no points @ 6.125%, and the payment is $2430/month. Perhaps you can pay $20k to get a loan @ 5.125%. Roll the $20k into the loan, and the payment is $2287/month. Not only that, but you'll have more of each payment going toward principal with the 2nd loan over the first in the early part of the loan term. If you were to sell after 5 years, you would have $4827 more equity with the 2nd loan, though your annual tax deductions would be less.
Click to expand...

Good tip.

Here's another gem: You should offer to pay for seller's closing costs.

Read carefully.

Say you've negotiated and are very close in terms to purchasing a home for a $1M strike price.

For our purposes, say the seller is going to net $1M less 6% commission and about .75% more (generalized escrow and title insurance fees).

Net cost to you $1M. Net gain to seller would be $932,500.

If you offer to cover up to $60K towards sellers recurring and non-recurring closing costs, try the numbers again.

Since they are based off of percentages, the closing costs come down by $4050.

Offer $936K plus said $60K.

Seller sees same bottom line (actually $320 more). Net cost to you, though, has dropped by $4000 just by restructuring.

Other fringe benefits:

Appraisal: slam dunk

Taxes: save $600+/year, every year

Downside:

Your new neighbors hate you for busting their value. Blame the market.

Where did that $4000 go? You've just trimmed the fat and taken advantage of a %-based system.

Hey wait, come to think about it, that's coming outta my paycheck... forget I ever wrote this.
Click to expand...

Excellent advice. I'm going to provide this little manifesto to whomever buys my place. You just lost yourself $1200 my friend...
 
IR2 (or IPO), i'm a little slow on finance:

so you are only going to finance based on 932k (which makes the appraisal easier)? doesn't this mean that you need to come up with $250k cash for the 20%down + $60k?

whereas if you purchase it for $1m, you only need $200k cash, right?

so you've invested another $50k in your equity instead of stocks/whatever? how is this good? or better than keeping the $50k invested?

thanks for helping me with my ignorance

ipoplaya said:
IrvineRealtor said:
Daedalus said:
What is the time value of money? If you're getting a loan for 6%/year, that's what money's worth to you and to the lender. If you run the numbers on paying points, you'll likely find it's worth it to do so from a financial standpoint. Paying out of pocket doesn't make sense if you're going to sell the place within a few years, but consider rolling the points into the loan. Eg: Get a $400k loan with no points @ 6.125%, and the payment is $2430/month. Perhaps you can pay $20k to get a loan @ 5.125%. Roll the $20k into the loan, and the payment is $2287/month. Not only that, but you'll have more of each payment going toward principal with the 2nd loan over the first in the early part of the loan term. If you were to sell after 5 years, you would have $4827 more equity with the 2nd loan, though your annual tax deductions would be less.
Click to expand...

Good tip.

Here's another gem: You should offer to pay for seller's closing costs.

Read carefully.

Say you've negotiated and are very close in terms to purchasing a home for a $1M strike price.

For our purposes, say the seller is going to net $1M less 6% commission and about .75% more (generalized escrow and title insurance fees).

Net cost to you $1M. Net gain to seller would be $932,500.

If you offer to cover up to $60K towards sellers recurring and non-recurring closing costs, try the numbers again.

Since they are based off of percentages, the closing costs come down by $4050.

Offer $936K plus said $60K.

Seller sees same bottom line (actually $320 more). Net cost to you, though, has dropped by $4000 just by restructuring.

Other fringe benefits:

Appraisal: slam dunk

Taxes: save $600+/year, every year

Downside:

Your new neighbors hate you for busting their value. Blame the market.

Where did that $4000 go? You've just trimmed the fat and taken advantage of a %-based system.

Hey wait, come to think about it, that's coming outta my paycheck... forget I ever wrote this.
Click to expand...

Excellent advice. I'm going to provide this little manifesto to whomever buys my place. You just lost yourself $1200 my friend...
Click to expand...
 
Daedalus said:
EvaLSeraphim said:
[The next time I need to split a restaurant tab, I'm calling Daedalus.
Click to expand...
:red: I realized after I posted I made a big mistake, but I was too lazy to get out of bed. When you sell does matter. In my example I neglected to take into account the outstanding principal of the $20k in points. In this case it takes about 10 years to get the balance of the $20k back in the form of (present value) of reduced monthly payments and increased principal.
Click to expand...

This all seems complicated to simple little me. Is there some online resource that lets you run these scenarios?
 
freedomCM said:
IR2 (or IPO), i'm a little slow on finance:

so you are only going to finance based on 932k (which makes the appraisal easier)? doesn't this mean that you need to come up with $250k cash for the 20%down + $60k?

whereas if you purchase it for $1m, you only need $200k cash, right?

so you've invested another $50k in your equity instead of stocks/whatever? how is this good? or better than keeping the $50k invested?

thanks for helping me with my ignorance
Click to expand...

In my case, I will be buying and then fairly immediately refinancing once I sell my condo after. If I can get a seller to go for this, I will put less down than I normally would so I can pay their closing costs, save a few thousand in the process and have a lower tax basis, and then refi to have approximately the same amount invested in the home as I would have less the thousands in savings...
 
hmmm...so you are saving $4k in "closing cost" plus 1.2% (tax rate) on the 64k difference in selling price, about $700/yr. now it is starting to make some sense to me, if you have the cash.

anything else i'm missing?
 
freedomCM said:
Is there some online resource that lets you run these scenarios?
Click to expand...

There are a lot of resources for calculating individual components (future value, amortization schedules, npv, etc) but I couldn't find any for comparing the cost/benefits of paying points. Try investopedia.com. A lot of universities are putting their coursework online too. I think Wharton does, and they're top notch.

This morning I was trying to solve for the break-even point with a hand calculator, and I took an iterative approach--take a guess, calculate component values using the guess, compare #s, guess again, recalculate, etc. There are better ways. I finally had some time tonight to make a spreadsheet. Was anyone here an accountant before spreadsheets were invented? :sick: Just curious.

I borrowed some forms I found in Excel, then created a sheet to compare 2 loan scenarios. I also added return on investment to the mix to account for what you might earn on the difference between mortgage payments. Hope the images aren't too big.

Screenshot of Loan 1, no points:

loan1.jpg


Screenshot of Loan 2, with points:

http://www.ozop.net/loan2.jpg

Screenshot of Comparison of the 2 loans:

http://www.ozop.net/loan3.jpg

Since they're only for comparing 2 loans, I ignored any changes in property values to compute the equity. Loan2 equity is -$20k right off the bat. Breakeven for this scenario is 73 months. I used 5% as the return for money saved on mortgage payments. If you were to sell the house after 4 years you would have to cough up over $7k more for doing so with loan2 vs loan1.

I still didn't account for how taxes will affect the real numbers.
 
wow, that is great. thanks so much for spending that time to educate the stupid (me). it really helps me visualize the difference in the two scenarios.

final stupid question (no promises!). when you roll the points into the loan, is the $420k your basis for RE taxes, or does the $20k get recorded separately, so that your basis remains $400k?
 
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