Mortgage rates headed down - time to refi?

[JPatrick]

Not sure if I quite have the brass cojones to do this, but a thought has crossed my mind: with the Fed whacking rates to beat the band and not about to reverse course any time soon, why not refi the mortgage onto a HELOC? Schwab offers a 70% LTV HELOC at prime minus 1%, which would be 5% right now (less if the Fed does what everyone seems to be expecting).

Regarding the FED raising rates, (or not) course reversal will occur and very possibly much sooner than we might imagine... The Fed wants to turn around housing with as little pain on the inflation and falling dollar front as possible. Just as soon as we see the slightest sign housing is recovering the Fed will jump at the chance to raise. IMHO I would think that will happen about 12 months from now.

 

[Lsbcal]

Saw this nice chart of what I think are mortgage rates that might appeal to some who are monitoring the situation: Bloomberg.com: Investment Tools

 

[Nords]

Not sure if I quite have the brass cojones to do this, but a thought has crossed my mind: with the Fed whacking rates to beat the band and not about to reverse course any time soon, why not refi the mortgage onto a HELOC? Schwab offers a 70% LTV HELOC at prime minus 1%, which would be 5% right now (less if the Fed does what everyone seems to be expecting).

That sounds like a great way to arb the interest rates.

What are the terms of the loan? Does it stop drawing after 10 years and require you to pay it back over the next 10?

NFCU shaved an eighth off their 30-year fixed-rate no-points 80% loan, but it's still 5.75% and .375% above our current rate. No change since the Fed meeting (yet).

I'm intrigued by this offer in NFCU's fixed-rate loan section: "Interest only payment options are available on 30 year products." But that's probably in its own class of interest rates.

 

[brewer12345]

HELOC's mostly come in the 10 year draw, 15 year repayment flavor. But Pen Fed's is a 15 year draw, bullet maturity.

 

[JohnDoe]

That's strange...looks like Pen Fed changed their rates twice today.

Around 11am 15yr was

5.125 0
5.000 .25
4.875 .875

Now they have

5.250 0
5.125 .375
5.000 1.125

 

[SecondCor521]

That's strange...looks like Pen Fed changed their rates twice today.

Around 11am 15yr was

5.125 0
5.000 .25
4.875 .875

Now they have

5.250 0
5.125 .375
5.000 1.125

I think PenFed changes their rates once a day around lunch time. So most likely you'll see the second set of rates until tomorrow lunch time.

2Cor521

 

[brewer12345]

I am patiently waiting to see if the 5/5 ARM goes to 4.5% or so. Given how low treasury rates are and the news on the chains around Fannie and Freddy being loosened, its only a matter of time before mortgage spreads decline.

 

[myself]

That's strange...looks like Pen Fed changed their rates twice today.

Around 11am 15yr was

5.125 0
5.000 .25
4.875 .875

Now they have

5.250 0
5.125 .375
5.000 1.125

The other option of course would be to "buy down" the rate by paying more points.

 

[laurence]

I am patiently waiting to see if the 5/5 ARM goes to 4.5% or so. Given how low treasury rates are and the news on the chains around Fannie and Freddy being loosened, its only a matter of time before mortgage spreads decline.

I know this would just be guessing, but how low do you think 15 year rates might go? I'm in a 20 year @ 5.125% so I don't think it will ever be worth it to refi, but I'm keeping my eyes open.

 

[brewer12345]

I know this would just be guessing, but how low do you think 15 year rates might go? I'm in a 20 year @ 5.125% so I don't think it will ever be worth it to refi, but I'm keeping my eyes open.

Sitting on the reaminder of a 15 year at 5% myself and wondering the same thing. I really don't know. Depends on whether the mortgage market ever heals. Hard to see treasuries much lower than where they are now, so I think this is mostly about spreads of mortgages over treasuries. I think spreads could drop 75BP, maybe more, but it would require the mortgage mess to come unstuck. As long as treasuries didn't sell off enough to offset the spread drop, mortgage rates could go down a good bit.

 

[DblDoc]

We are about to close (hopefully) with a Pen Fed 15yr @ 5% thanks to the early posts in this thread so not likely to refi again unless rates really tumble.

DD

 

[JohnDoe]

I'm sitting on a 30 yr @ 6.5, and I want to get under 5 on a 15yr.

I was about to call pen fed at lunch today to see what 3 points would get me, but they changed the rates.

 

[Darryl]

I closed with Penfed a couple weeks ago at 15yr fixed 4.625% I think the rate was only that low for a day. I did the app at night and the next morning I had an email saying thanks all you need to do now is choose when to lock your rate (which I thought I did the night before) I replied to lock now and a few hours later the rate was climbing.

 

[JohnDoe]

Yea, it went from 4.625 to 5.125 the next day. That's an awesome rate.

 

[BristolBane]

Hi folks. Just thought I would mention this again as PenFed is currently offering 30 yr fixed at 4.875 with 0 points.

I pulled the trigger and submitted my application. I'm just hoping the appraisal does not come in so low that my LTV is > 80%. We've lost some value in the last couple years. Not sure how much though.

 

[brewer12345]

I am thinking that I will be watching Pen Fed's 5/5 rate like a hawk. If it dips to 4.25% or less I will almost certainly pull the trigger.

 

[clifp]

Is anybody watching PenFed's CD rates? When they go back up to 6%. Somebody please post that ....

Right now I have 1 CD at 6% 1 HELCO at 4.99% and another CD at 4%. Seems like PenFed and I are even in the interest rate department.

 

[jblack]

Hi folks. Just thought I would mention this again as PenFed is currently offering 30 yr fixed at 4.875 with 0 points.

Note that PenFed is still charging a 1% origination fee for all fixed mortgages....they previously didn't do this. These are still are great rates, though.

 

[Nords]

Is anybody watching PenFed's CD rates? When they go back up to 6%. Somebody please post that ....

I'm gonna be crying when my 6.25% CD matures in January...

 

[TomCat]

W/O reading this entire thread...is PenFed a or THE best source for online CDs and Mortgage offerings??

I am considering refinancing my 15 yr 5.375% mtg and I also have a 10 year fixed income ladder with mostly Bank CDs averaging 5% return. I am in need of a 7 year maturity and a 10 year maturity and have been waiting/looking for some better rates. My anticipation is that CD rates will go up vs down in the next couple of years.

My 15 year mortgage has less than 10 years and I am open to some of the lower rate options...say 10/1...w/additional principal payments to amortize over the reduced interest rate 10 year period. That creates lower/lowest? rate...but accomplishes mortgage payoff at about the same time as my current 15 year...which is my general goal.

I could payoff right away...but I like the discipline of using current earnings to pay down mtg...vs. reducing investment assets. I am self-employed...somewhat less than 50% of my time...trying not to reduce investment assets for another 4-5 years. Consulting practice doing pretty well...withdrawn little/nothing for 7+ years of "flexible" working arrangement

Thanks...1st post...Tom R in Two Harbors, Mn

 

[brewer12345]

Hi, Tom. Might be a nice idea to introduce yourself on the "Hi, I am..." forum.

Anyway, IMO Pen Fed might or might not be the best place for mortgages and CDs, but I definately shop them first and then see if anyone can beat it. Right now, they are as competitive as anyone on CD rates, and its still piddling interest. I am hoping that they do a "special" in January as they sometimes have in the past, but 4% for 5 years would be a gift right now and its not exactly an exciting yield.

As for mortgages, I am in a very similar boat. I have about 8.75 years left on my 4.99% 15 year note. I am salivating at the thought of a refi, but rates are just a hair too high to pull the trigger. While I would prefer to refi ino a 10 or 15 year fixed loan, the games lenders are playing with fees make this unattractive thus far. However, I am watching the 5/5 loan they offer because they eat almost all of the fees on their adjustable rate loan. The structure of that note is that it adjusts once every 5 years to the lower of their current rate for the product, the indexed rate in the contract, or no more than 2% higher than the original rate. So this means that if you take the loan at 4.5%, it will not reset to higher than 6.5%. Since I would only have a few years to go after the reset, when I spreadsheet this loan and assume that I keep up with my current payments (to finish my 4.99% note in 8.75 years), I essentially cannot lose if they drop the 5/5 loan to 4.25%. So I am watching and waiting, and if they drop the rate by another quarter point I will jump on it.

I suggest you build a spreadsheet to model keeping your current loan vs. the worst possible outcome on the various flavors of ARM you come across. The 5/1 product that most lenders offer is unattractive to me vs. my fixed note because they can adjust every year after the first reset and keep pushing rates higher and higher. But this would not be that obvious without my spreadsheet.

 

[thefinancebuff]

As for mortgages, I am in a very similar boat. I have about 8.75 years left on my 4.99% 15 year note. I am salivating at the thought of a refi, but rates are just a hair too high to pull the trigger. While I would prefer to refi ino a 10 or 15 year fixed loan, the games lenders are playing with fees make this unattractive thus far. However, I am watching the 5/5 loan they offer because they eat almost all of the fees on their adjustable rate loan. The structure of that note is that it adjusts once every 5 years to the lower of their current rate for the product, the indexed rate in the contract, or no more than 2% higher than the original rate. So this means that if you take the loan at 4.5%, it will not reset to higher than 6.5%. Since I would only have a few years to go after the reset, when I spreadsheet this loan and assume that I keep up with my current payments (to finish my 4.99% note in 8.75 years), I essentially cannot lose if they drop the 5/5 loan to 4.25%. So I am watching and waiting, and if they drop the rate by another quarter point I will jump on it.

5/1 ARM is under 4% at many places, often with low or no closing cost. It's more risky than 5/5 ARM but with only a few years left, you can just pay the whole thing off if you don't like the rate when it adjusts.

 

[TomCat]

5/1 ARM is under 4% at many places, often with low or no closing cost. It's more risky than 5/5 ARM but with only a few years left, you can just pay the whole thing off if you don't like the rate when it adjusts.

I agree...that may make sense for me since it would not really hurt much in my planning if I decided to pay off at end of 5 years. I have a US Bank mortgage officer that has done 3-4 mortgages for me over the years...I am going to check with her Monday...my guess is they will not be competitive with the online rates??

Thanks...Tom R

 

[brewer12345]

5/1 ARM is under 4% at many places, often with low or no closing cost. It's more risky than 5/5 ARM but with only a few years left, you can just pay the whole thing off if you don't like the rate when it adjusts.

Such as? The problem is also to total cost of the financing. Not real interested in swallowing a bunch of fess that jack up the total cost of the note. I also have a fair amount of trepidation on the riskier loan, since I spent years as a distressed debt analyst and watched/took advantage of a number of otherwise decent businesses which made poor financing decisions.

 

[TomCat]

Such as? The problem is also to total cost of the financing. Not real interested in swallowing a bunch of fess that jack up the total cost of the note. I also have a fair amount of trepidation on the riskier loan, since I spent years as a distressed debt analyst and watched/took advantage of a number of otherwise decent businesses which made poor financing decisions.

Thanks Brewer. What about the 10/1 on the PenFed site? APR w/no points = 3.416%. I don't follow this? Face rate 5.375% 0 Points APR 3.416

Must be an error here? Maybe my I don't have the definition correct? 10/1 should have fixed rate for 10 years w/annual rate adjustments to 30 years? Maybe they are "assuming" rate adjustment at 10 years at today's interest rates? I'll bet I just found the "flaw"

BTW worse case I am very OK having to payoff at 5/7/10 years if I do not like the "new" rate...as long as I get significant savings during "fixed" rate period.

Since my exisiting mortgage is 5.375% and I have just under 9 years (on 15 yr original) remaining...I will likely not refinance unless I drop the rate to 4.5% or less.

Thanks...Tom R