Non-Owner Mortgage Refinance theory. Comments welcome.

So what's losing 2points or adding negative points cost on the 30 year interest rate?  3/8 or 1/2?

$20K seems to.be an expemsive fees and points package.  Each point is only $5650-5850.
 
Non owner adds 2.25 points to any posted rate and fees. Assuming 3.25 is about 1.0 point in fee to obtain, and closing costs running 4k, PLUS 2.125 points for Non-owner, that scenario was going to run close to $20k in fees "all in".

My .02c
 
This is when having the ability to move into the new build and declare it as your primary is IMPORTANT. Things happen in life where you have to move out later after you taken possession of the property happens all the time.
 
Soylent Green Is People said:
The owner believes that within 5 years rates will be considerably higher than where they are today. Even though 5 years are left on the loan, refinancing is being considered. At present, the offers on the table are as follows:
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Curious what you think about this statement...
I'm kind of in the camp right now where I think it's possible you don't see the 10 year back up to say 3-4% until 2030.  I think 3-4% would be the definition of considerably higher? (I'm just using the 10 year as an example for rates)
 
Soylent Green Is People said:
If B, and for some reason there is a sale of the home in year 7-8-9 or so of this scenario, the loan payoff balance would higher than scenario A or leaving the loan as is. How certain is ownership over the expected period of time? Hard to know. Although this owner believes they will keep the property for an extended period of time, shouldn't this too enter into the decision process?

My .02c
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That would be likely true if the rate adjusted down in year 6 from today on option A. If the rate adjusted upwards, ymmv.

Consider a point in time five years from today. Option A, you'd have paid approx. $10k in interest more compared to option B. So, you still have $10k to recoup in the coming years before you breakeven. If the rate adjusted upwards, depending on the delta, your recoup period on option B could be anywhere between 1-5 years. SO, a good decision. If the rates adjusted downward, you'd be moving closer to a point where you'd feel that you made rash decision five years ago.
 
Here's an example of pricing using what's available on-line with also the assumption of a 760 FICO and 75% LTV SFR:

Freddie Mac says their average rate today is 3.58% for .50 in fees/points (8/29/19 here:http://www.freddiemac.com/pmms/)

Fannie Mae's Loan Level Price Adjustments (found here: https://www.fanniemae.com/content/pricing/llpa-matrix.pdf) Add the following:

LLPA Credit Score (740): .25 in fee
LLPA Product Feature (non-owner): 2.125
LLPA High Balance: .25 in fee

A 3.58 rate at .50 in fee is now 3.58 at 3.125 in fee.

Assuming .50 in fee for .125% in rate (YMMV) a buy down to a 3.25% rate would cost 4.125 in points BEFORE any margins or origination fees specific to the lender! The original post had a loan amount of $565,000. 4.125 x $565,000 is $23,306.25

PS - Using the original 3.58 at .50 "no-cash out" is actually 3.125 in cost. Using the same LLPA matrix, add 1.0 in fee for Cash Out (High Balance) and an additional .375 for FICO score! Now you're looking at 4.50 in costs! To absorb those costs borrowers try to raise the rate for more yield to cover these costs. Even then at a mid to upper 4 rate, that will still leave a point or two to pay out of your cash out.

ARM programs do not have the same YSP as fixed rates which is why Non-Owner ARM loans or Non-Owner Cash Out ARM loans are so expensive.

My .02c
 
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