Pen Fed 5/5 ARM on special again

[FUEGO]

Nice, I scooped this one up right at the bottom.

[calmloki]

We're all preapproved - hadn't heard back from them so called in and they DO show I have the rate locked - due to it being a refi they won't contact me for a week or so. Considering doing a lump sum payment of the difference between our current annual payments and the new 30 year amort payments every year on the first month - should save another couple hundred/year in interest expense vs continuing to pay at our old rate. By the time year 5 is done and the rate is due to reset we will only owe the last 3 years worth of payments - depending on the interest climate at that time we could either pay off or continue at no more than 5.875% - which, historically is a super rate.

[FUEGO]

Another data point: We were instantly approved upon applying Friday night (actually about 12:30 am Saturday morning Eastern time). Last night at 7:30 we received an email from the Loan Processor assigned to our application and in the email they asked probably 10 questions regarding the loan (mostly confirming stuff we put in the app).

One thing that concerns me slightly is that they gave me a 45 day lock on the rates, yet they say their processing time is running 45-60 days now. Not sure what happens on the 46th day if my loan hasn't cleared by then, particularly if it is their delays on their end holding things up. Supposedly I'm on the hook for any fees incurred if the loan doesn't close for any reason.

[WanderALot]

Fuego, our situation is almost the exact same as yours. We have a 5% loan with about 100K left on it. I know that the rates are back up to 4%, but in the past, closing costs of 3K always killed the deal. But, without the 1% and if they will pay most of the fees, this might be worth it. So you are only going to pay a few hundred in fees?

[FUEGO]

Quote:

Originally Posted by WanderALot Fuego, our situation is almost the exact same as yours. We have a 5% loan with about 100K left on it. I know that the rates are back up to 4%, but in the past, closing costs of 3K always killed the deal. But, without the 1% and if they will pay most of the fees, this might be worth it. So you are only going to pay a few hundred in fees?

Not 100% sure, but I got the good faith estimate and the only big expenses were recording fees, title insurance, revenue stamps for recording, lien release. The title insurance says $152. The recording fees are probably $50 or so depending on length of the loan docs. Lien release is $40 ("release and satisfaction" I think is the formal name). Oh yeah, we bought the rate down 1/8 % so we will owe $110 for that too, but the buy down pays for itself after a year. We may have to pay $400 in closing costs.

There are of course pre paid interest for the period before your regular monthly payment cycle begins, plus any amounts necessary to be escrowed. I'm not doing escrow on mine since I'm under the 60% LTV which they said was their threshold for requiring escrow. I believe the other big fees (appraisal, title search, attorney fees, doc prep, credit/flood cert) are picked up by Penfed as long as you aren't refinancing an existing Penfed mortgage. They told me penfed home equity loan doesn't equal "mortgage" for this offer, so I qualify.

[WanderALot]

Quote:

Originally Posted by FUEGO Not 100% sure, but I got the good faith estimate and the only big expenses were recording fees, title insurance, revenue stamps for recording, lien release. The title insurance says $152. The recording fees are probably $50 or so depending on length of the loan docs. Lien release is $40 ("release and satisfaction" I think is the formal name). Oh yeah, we bought the rate down 1/8 % so we will owe $110 for that too, but the buy down pays for itself after a year. We may have to pay $400 in closing costs.

$400 is closing costs (minus the prepaid interest) sounds great! This is definitely lower than what is listed on the website when I put in my loan stats. I guess I need to call them like you did. Our current loan is not with PenFed and our LTV is also pretty low, so I'm sure we wouldn't have escrow anything.

My other alternative is to pay off the loan with my HELOC (currently 3.0%) but that obviously involves a higher interest rate risk.

[brewer12345]

Quote:

Originally Posted by WanderALot Fuego, our situation is almost the exact same as yours. We have a 5% loan with about 100K left on it. I know that the rates are back up to 4%, but in the past, closing costs of 3K always killed the deal. But, without the 1% and if they will pay most of the fees, this might be worth it. So you are only going to pay a few hundred in fees?

As an alternative, I am lead to believe that for 1% of your loan balance as a fee, they will re-lock your loan for another 5 years at the current rate they offer on the product.

[WanderALot]

Quote:

Originally Posted by brewer12345 As an alternative, I am lead to believe that for 1% of your loan balance as a fee, they will re-lock your loan for another 5 years at the current rate they offer on the product.

Thanks Brewer, but my current loan is not with PenFed.

If I do decide to refi my loan, do I have to close my HELOC and open another one? My margin is currently have Prime - 0.5 or something like that and it looks like I can't get anything close to that now. The HELOC's LTV is about 15%.

[brewer12345]

Quote:

Originally Posted by WanderALot Thanks Brewer, but my current loan is not with PenFed. If I do decide to refi my loan, do I have to close my HELOC and open another one? My margin is currently have Prime - 0.5 or something like that and it looks like I can't get anything close to that now. The HELOC's LTV is about 15%.

You may or may not be able to keep your HELOC. It depends on the lender's willingness to resubordinate their lien when you refi. Some lenders want out of the HELOC biz entirely and will not play ball. Others seem to be making a case y case decision. When I refi'd in November, Schwab agreed to resubordinate my existing (underpriced) HELOC and leave it open. My first mortgage was at roughly a 45% LTV and the HELOC was undrawn. YMMV.

[calmloki]

Got the call today - loan is back from the underwriters; we are scheduled to sign on Monday 3/1, about 28 days from first contact. Not quite as easy as the first loan just a bit over two years ago - this had a physical appraisal - but pretty darn simple. We are going to borrow at 70% loan to value, which will get the cost down to about $750 for $157,500. Oddly enough, the house appraised for exactly the same amount it did last time, when we did an 80% home equity loan. We'll go ahead and borrow the maximum - 3.875% is cheap money and the other costs would remain the same, so i'll see if I can't make more than that on the small amount of cash back.... Thanks PenFed!

[FUEGO]

Quote:

Originally Posted by calmloki Got the call today - loan is back from the underwriters; we are scheduled to sign on Monday 3/1, about 28 days from first contact. Not quite as easy as the first loan just a bit over two years ago - this had a physical appraisal - but pretty darn simple. We are going to borrow at 70% loan to value, which will get the cost down to about $750 for $157,500. Oddly enough, the house appraised for exactly the same amount it did last time, when we did an 80% home equity loan. We'll go ahead and borrow the maximum - 3.875% is cheap money and the other costs would remain the same, so i'll see if I can't make more than that on the small amount of cash back.... Thanks PenFed!

That's good news. We had a physical appraisal too (last week), even at a touch under 60% loan to tax value (in a non-bubble real estate area).

Maybe we'll get the call/letter to close soon. I had to laugh at the payment - $400 or so a month.

[FUEGO]

Everything for our 3.75% penfed 5/5 ARM is ready for closing on Monday. $706 in closing costs broken down as follows: $370 in miscellaneous title research/preparation/abstract/binder fees, $87 in recording fees, $137 in title insurance fees, and $112 to pay for the interest rate buydown to 3.75% (1/8th of a percent). A few hundred higher than what I was expecting and hoping for, but still very reasonable on a $90,000 loan. And of course on top of these closing costs, there is a little prepaid interest and a small amount to pay off the refinanced loan.

The check I'm writing at closing is $1300 or so.

The only thing I'm disgruntled about is the $370 in miscellaneous title fees. They said they pay the settlement/attorney fees in their "low closing cost" mortgages, and I assumed all these title research and prep fees would be included in the attorney's fees (they usually are in my jurisdiction). Apparently not. $370 is a little high for these fees on top of a settlement fee, since the attorney we closed with a few years ago on a previous refinance only charged $375 total. Not quite worth arguing over, and they do state that the borrower will pay "title fees" in their disclosures, even though I think they are adding some junk fees in there based on what it usually costs for these type fees. But we need to close ASAP since our 45 day rate lock expires mid March and we are leaving soon to go out of the country on vacation until a day or 2 before the rate lock expires, hence we can't risk losing the rate over a couple hundred bucks.

In the grand scheme of things, we will still save 3-5 thousand bucks over the course of the loan, and have the flexibility to cut our current mortgage payment by 2/3 should we have cash flow/liquidity issues.

Looks like I applied Jan 30 and we are closing Mar 1, so 31 days from application to closing, not bad. Assuming we actually close Monday. I like the fact that they accept communication by email and allow documents to be scanned and sent via email. That trimmed at least a week off the process I think. We did turn around everything within a day of when they requested something, hoping that we could close before our big vacation.

[WanderALot]

Quote:

Originally Posted by FUEGO That's good news. We had a physical appraisal too (last week), even at a touch under 60% loan to tax value (in a non-bubble real estate area).

We had a physical appraisal even though our LTV was under 20%! Seems like a waste of money to pay for the appraisal, but I guess they are worried because we are in CA.

Quote:

The only thing I'm disgruntled about is the $370 in miscellaneous title fees. They said they pay the settlement/attorney fees in their "low closing cost" mortgages, and I assumed all these title research and prep fees would be included in the attorney's fees (they usually are in my jurisdiction). Apparently not.

That definitely seems high. Now you got me worried about my loan! They quoted me about $350 in title insurance and I confirmed that with the title girl who called me. The title girl also said that there are about $360 in settlement fees which PenFed usually covers. Who knows. My loan is scheduled to close in about a week.

On another note, I was a little surprised that the title girl called me to ask me about my account numbers and contact info for my current mortgage and undrawn HELOC (which will be closed after the refi). Is this standard practice? I haven't done a refi in a while but it seems like they should be able to figure out all of this stuff themselves.

[calmloki]

on a 70% LTV loan of $155,750 we paid a total of $1419.65 in settlement charges, of which $452.65 was interest from 3/5 to 4/1, so total loan cost for that amount was $967 - about $200 more than I thought, but still cheap fast and easy money. No complaints here.

[haha]

Quote:

Originally Posted by calmloki Got the call today - loan is back from the underwriters; we are scheduled to sign on Monday 3/1, about 28 days from first contact. Not quite as easy as the first loan just a bit over two years ago - this had a physical appraisal - but pretty darn simple. We are going to borrow at 70% loan to value, which will get the cost down to about $750 for $157,500. Oddly enough, the house appraised for exactly the same amount it did last time, when we did an 80% home equity loan. We'll go ahead and borrow the maximum - 3.875% is cheap money and the other costs would remain the same, so i'll see if I can't make more than that on the small amount of cash back.... Thanks PenFed!

Calmloki, could you expalin this loan to me? It is fixed for five years, then at the fifth anniversary and every fifth anniversary after that, the rate can be bumped? Are there contractual limits on the increases, or is it just tied to some index?

I tried to read about this at the Pen Fed website, but to me at least the website stinks.

Ha

[WanderALot]

Quote:

Originally Posted by haha Calmloki, could you expalin this loan to me? It is fixed for five years, then at the fifth anniversary and every fifth anniversary after that, the rate can be bumped? Are there contractual limits on the increases, or is it just tied to some index?

I'm not Calmloki, but I'll answer anyways. It's fixed for 5 years and then has the potential to adjust every 5 years (adjust at 5, 10, 15, 20, 25-year marks). The max it can adjust up is 2% at each mark and the total max it can adjust up is 5%. It's tied to the CMT index and different people have gotten different margins. My margin is 1.75, my rate will adjust to the lower of:

1. CMT + 1.75
2. Current rate + 2%

[calmloki]

Just as you say, with a 2% maximum bump/adjustment and a maximum of 5% total bump. Rate could go down as well. Hah! So at the rate I locked, 5 years at 3.875%, years 6-10 at 5.875%, years 11-15 at 7.875%, and years 16 on at 8.875%. It is tied to the index of 1%+ the weekly average yield on US treasury securities adjusted to a constant maturity of 5 years. Wha?

There is also a modification to the adjustable rate note we signed that had me scared, but it only affects 4B and 4C, stopping short of 4D, which speaks to the limits of interest change and the maximum change rate and maximum interest chargeable. Did give me pause to read closely.

[ChrisC]

Quote:

Originally Posted by calmloki Just as you say, with a 2% maximum bump/adjustment and a maximum of 5% total bump. Rate could go down as well. Hah! So at the rate I locked, 5 years at 3.875%, years 6-10 at 5.875%, years 11-15 at 7.875%, and years 16 on at 8.875%. It is tied to the index of 1%+ the weekly average yield on US treasury securities adjusted to a constant maturity of 5 years. Wha? There is also a modification to the adjustable rate note we signed that had me scared, but it only affects 4B and 4C, stopping short of 4D, which speaks to the limits of interest change and the maximum change rate and maximum interest chargeable. Did give me pause to read closely.

Expect to always be at 2 percent maximum rate increase at each reset:http://www.federalreserve.gov/releas..._TCMNOM_Y5.txt

[haha]

Quote:

Originally Posted by calmloki Just as you say, with a 2% maximum bump/adjustment and a maximum of 5% total bump. Rate could go down as well. Hah! So at the rate I locked, 5 years at 3.875%, years 6-10 at 5.875%, years 11-15 at 7.875%, and years 16 on at 8.875%. It is tied to the index of 1%+ the weekly average yield on US treasury securities adjusted to a constant maturity of 5 years. Wha?

Thanks Calmloki and WanderALot. This sounds quite good. I'm 68, so I would be 78 before I would be even a point above today's 30 year fixed rate. My guess is that we will see some pretty high rates within 5 years, but it really won't matter with this loan if I understand correctly.

Quote:

There is also a modification to the adjustable rate note we signed that had me scared, but it only affects 4B and 4C, stopping short of 4D, which speaks to the limits of interest change and the maximum change rate and maximum interest chargeable. Did give me pause to read closely.

Could you explain this part?

Ha

[calmloki]

Quote:

Originally Posted by haha Thanks Calmloki and WanderALot. This sounds quite good. I'm 68, so I would be 78 before I would be even a point above today's 30 year fixed rate. My guess is that we will see some pretty high rates within 5 years, but it really won't matter with this loan if I understand correctly. Could you explain this part? Ha

Sorry, the loan modification affected parts 4B and 4C of the loan, but did not affect the critical limit on the interest rate listed in 4D. Thought when I first read it that it modified the terms in a meaningful way, but by my reading did not. I hope.