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House sold quickly
Old 06-09-2014, 08:57 AM   #1
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House sold quickly

So I just purchased a new home before selling the old one. I got a 3.5% ARM loan to finance the purchase. Now the old home has quickly sold and will close in 3 weeks. The mortgage broker has asked that I not pay off the loan for 6 months. What would you do with the proceeds? Invest, payoff immediately, or maybe a 6 month cd? Thanks for your input.
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Old 06-09-2014, 10:09 AM   #2
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I'd pay off immediately. I don't think you can find any safe investments that guarantee 3.5% so why risk it? The broker's desire should have no bearing on your decision.
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Old 06-09-2014, 10:11 AM   #3
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That's what we did last summer, bought new home about a week before putting the old one on the market and it sold in 2 days. I used a heloc for the down payment on the new house. We had to lease back our house for 3 weeks until the new house was finished, but that avoided moving everything into storage.
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Old 06-09-2014, 10:20 AM   #4
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Since it is an adjustable rate mortgage I would pay off immediately.

If it had been fixed I would lean toward investing it ( and make money over a long period with the spread).

Would not do any CD's as this will likely be a net outflow of cash to you.
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Old 06-09-2014, 10:21 AM   #5
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Did the mortgage broker explain why? I suspect that perhaps the lender will clawback all or a large proportion of his origination fee if the loan pays off within 6 months and he would get less or nothing for the work he has done for you (which would seem to be unfair to him).

If you don't care about the relationship with the mortgage broker you could just go ahead and pay off. If you do care about the relationship with the mortgage broker, you could discuss with him. You may be better off to pay off and then separately pay him something for his services or make him whole on the deal.

My mortgage broker has done some fine work for me over the years so I would probably lean towards the latter.
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Old 06-09-2014, 10:34 AM   #6
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Quote:
Originally Posted by pb4uski View Post
If you don't care about the relationship with the mortgage broker you could just go ahead and pay off. If you do care about the relationship with the mortgage broker, you could discuss with him. You may be better off to pay off and then separately pay him something for his services or make him whole on the deal.
+1. You may not "owe" the mortgage broker anything (check the fine print), and the risk that some borrowers will pay off their loans very fast is probably something he/she accepts. But, if you value the service you received and think it was worth something, you can offer to compensate him/her.
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Old 06-09-2014, 12:21 PM   #7
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I have nothing to add to the wise posts above, except my congratulations on selling your house so quickly! That is a seller's dream come true.
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Old 06-09-2014, 02:37 PM   #8
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Thanks for the replies, yes that is the deal, if I pay it off right away the broker doesn't get paid. I didn't think of that but I can offer to take care of him, that seems like a fair option.
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Old 06-09-2014, 03:32 PM   #9
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I caution you to be very specific when you say "you will take care of him". I would not leave it open ended. If you want to be charitable, let him know exactly the amount of the donation you are giving him/her.

You should also check the paper work (if any) that you signed with the broker to make sure you have no obligation to him under his agreement if you payoff the loan. You probably don't but I would check to be sure. This is a business that relies on small print.

Perhaps this person is very nice. But his boss may not be. Make sure you understand your obligations (if any) before determining to be charitable.

Congratulations
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Old 06-09-2014, 03:33 PM   #10
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Congrats on your house selling so quickly!

A long time ago a refinance we did had a clause in it that we had to pay a fee for the complimentary appraisal retroactively if we paid the loan off before three years were up. No broker was involved, though.

Nice of you to consider the broker.
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Old 06-09-2014, 04:26 PM   #11
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Am looking to buy before I sell. It is all nerve-wracking, and I'm glad to read this good news post.
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Old 06-09-2014, 07:50 PM   #12
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Just wondering, if I did keep paying the loan for 6 months, where would you hold the sale proceeds?
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Old 06-09-2014, 10:01 PM   #13
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Probably an online savings account.
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Old 06-10-2014, 08:05 AM   #14
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I'm in the opposite situation of the original poster. Bought a new home (closed 2-28-14) and got our previous home listed by a Realtor. Moved into the new house three weeks ago. Still waiting for an offer on the old one. I think the average wait time is 90 days. In the meantime, we're paying on a mortgage and it's driving me nuts. I don't sleep good when I have something like that hanging over my head. Will pay off the new house as soon as the old one is closed. It's the waiting that is killing me.
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