Pen Fed 5/5 ARM on special again

[brewer12345]

No telling how long it will last, but Pen Fed is again offering its 5/5 ARM for 4% with no points. I recently completed a refi into this loan and the experience was pretty good.

 

[crazy connie]

What kind of costs did they throw in Brewer?

 

[FUEGO]

I saw on your other thread that your costs were between $1000-2000. Can you make a rough breakdown of the costs?

I also notice that their website does not indicate a 1% origination fee on the 5/5 ARM products that are non-jumbo (under $417,000).

Ima have to see if I can get me one of these I think.

CORRECTION: I just talked to penfed and their website is inaccurate or at the least misleading. The 5/5 ARM DOES carry a 1% origination fee and they don't pay any closing costs. They told me roughly $2000 in closing costs for a mortgage a bit under $100k.

 

[ProspectiveBum]

Here's what I get when filling out their app online. FWIW, I am seeing the 1% origination fee.

Pentagon Federal Credit Union Fees

Origination Fee $1,900.00
CLO Access Fee $65.00

Total Pentagon Federal Credit Union Fees $1,965.00

Third Party Fees

Appraisal Fee $425.00
Credit Report $12.66
Flood Certification Fee $7.00
Settlement or Closing Fee $900.00
Title Insurance $775.00

Total Third Party Fees $2,119.66

Taxes and other Unavoidable Fees

Recording Fee $65.00
Lien Release $40.00

Total Taxes and other Unavoidable Fees $105.00

Total Closing Fees $4,189.66

Brewer, I take it you called and haggled with them a bit?

 

[brewer12345]

They picked up the settlement fee, appraisal fee, credit report, tax service and flood cert fees, adding up to about $650. My out of pocket to do the deal was about $1600, including a quarter point (about $400). Most of my out of pocket was title insurance ($725) and mortgage recording taxes ($320). This was on a 157k loan.

They did not charge me the 1% fee, so I would call and get that clarified.

 

[calmloki]

We have a bit over $155k at 5% on our home through PenFed - Refi-ed back a couple years ago back on 1/27/08 when it was a zero cost loan. As a ten year amortization the monthly cost is stiff but doable. If we bought the 1% lower 5/5 thirty year amortization loan our monthly payment would drop by $1167 - but we would be locked into this house for at least several years just to break even. Did notice that the 5/5 is assumable by approved new people for $500. An assumable low interest mortgage might be real attractive in a sale. hmm. While low interest is always attractive I think I'll keep my options more open and wait.

4.000% 0.000% 4.643% $751.32 $3,388.38

 

[FUEGO]

I called tonight. I think their policies changed very recently because what they told me while reading from a data sheet about the 5/5 loan did not agree with their website regarding fee waivers and origination fees. Basically this loan has a 1% orig fee, plus you pay all loan fees and closing costs (which they used to waive). For me, I would save $5000 over roughly eight years by paying another .5% buydown to 3.75% and spending $2500 to do so. NPV of the $5000 savings is probably $4300 or so. Not hardly worth the hassle given a few other factors particular to my property.

 

[brewer12345]

Interesting. They move their fees and rates around a lot, so I think it is worth watching. They may get loopy again like on 9/30.

 

[FANOFJESUS]

I heard on the fat wallet forum that when it gets very busy at Penfed they put on the 1%origination Fee then take it off when they are not busy. I don't know if this is true but it makes some sense.

 

[CCdaCE]

Down to 3.875, now.

Don't know how long it's been this way, or how long it will be... but, it's down to 3.875 for a 5/5 ARM. I don't see where ARM's are charged the 1% fee anymore, either, only on fixed.

Rate Points APR
3.875 0.000 3.552
3.750 0.125 3.518
3.625 0.500 3.504

-CC

 

[FUEGO]

Home equity loans just dropped to 3.99% fixed rate as well for up to 60 months. May do that instead depending on closing costs. Time for some analysis...

 

[FUEGO]

Just talked to mortgage department at penfed. 1% origination fee IS waived on this one. They also waive around $450 in appraisal fees if you are refinancing from outside of penfed, otherwise you pay the $450. For a $100,000 loan they told me $1400 in closing costs (essentially all closing attorney fees plus title insurance). That $1400 was much lower the last couple of property transactions we did including refi's and purchases.

Decisions decisions... 30 year for flexibility but pay some closing costs, or 5 year for up front cost savings and HAVING NO MORTGAGE IN 5 YEARS!!! My monthly payment would go up about $500/month for the 5 year option vs the roughly 8 years I have left on the 5% fixed loan right now. DW did just get a big raise... time to bust out the spreadsheet I guess.

 

[FUEGO]

Just called back a second time to confirm. Apparently they also pay attorney's fees if you use their selected attorney/closing agents. Title insurance and recording fees are all that you pay (unless refinancing an existing penfed mortgage). Couple hundred bucks. Refi-ing a penfed home equity loan IS NOT refinancing a "first mortgage" (which is what I'm doing) so I still get the low closing cost deal.

Also, anyone with an ARM from Penfed, they apparently are allowing buy downs without refinancing. You pay 1% and they basically do a redo on the 5 year initial fixed portion and bring it down to 4% (per fatwallet). That may be 3.875 now.

 

[FUEGO]

And... approved. I hit submit, they played a little elevator music and a minute later I was approved. Of course the incomes listed were significantly greater than the loan requested, and assets listed were over 5 times the loan requested. Apparently having 50+ credit cards, probably a dozen of which I obtained in the last year, wasn't a problem. Credit is tight!!

We went with the 30 year 5/5 ARM at 3.75% and 0.125% discount points. Hopefully it will just be a few hundred net out of pocket from what it sounds like.

We'll probably save somewhere around $5000 over the anticipated 8 year repayment of the loan by knocking 1.25% off the rate (for the next 5 years at least) versus our current 5% loan. Who would have thought rates would be this cheap? How low can they go?

Thanks CCdaCE for saving me a couple of bucks!

Note: one little problem I noticed was that they never disclosed the margin on the index that our adjustable rate is tied to. It is tied to the weekly 5 year Constant Maturity Treasury Index, but they never disclosed the margin. Very disconcerting that I probably just read through or skimmed closed to 100 pages of boilerplate disclosures, and the key term I was looking for was not disclosed at all. Good think we have all those consumer protection laws in place. Maybe they buried the margin term somewhere in a subclause on page 87?? I'll have to reread the docs tomorrow to see if I missed it somehow. Should be in the big bold box disclosure on page 1 where the other key terms were.

 

[FUEGO]

Just called penfed. The margin for the 5/5 is 1% above the 5 year CMT index. 5 yr CMT = 2.41 right now, so the ARM would readjust to 3.375% if it reset today (the contract says round to nearest 1/8).

 

[CCdaCE]

Thanks for all the "nuts and bolts" info.

-CC

 

[calmloki]

Ya know, sometimes people are just too busy to make money. Conversely, an idler like meself can spend an hour or so to refi his 1/2008 4.99% Penfed loan with 8 years left on it into a 3.875% 5/5 ARM and save $5-6k over the next 5-8 years. Figure we will make a single payment equal to the difference in the annual payments on the first of every year and by the time year 5 rolls around we can either pay the loan off or let it ride the remaining 3 years. Once again Pen fed will be paying us a bit more on CDs than they are charging us on the loan. Something about that appeals to me....

 

[FUEGO]

Ya know, sometimes people are just too busy to make money. Conversely, an idler like meself can spend an hour or so to refi his 1/2008 4.99% Penfed loan with 8 years left on it into a 3.875% 5/5 ARM and save $5-6k over the next 5-8 years. Figure we will make a single payment equal to the difference in the annual payments on the first of every year and by the time year 5 rolls around we can either pay the loan off or let it ride the remaining 3 years. Once again Pen fed will be paying us a bit more on CDs than they are charging us on the loan. Something about that appeals to me....

I see you had the same loan as I did before and went into the same loan as I did. And plan on saving the same amount. I noticed that the CD rates are just a touch below where the 5/5 interest rates are. Not sure how they are making money...

 

[calmloki]

I see you had the same loan as I did before and went into the same loan as I did. And plan on saving the same amount. I noticed that the CD rates are just a touch below where the 5/5 interest rates are. Not sure how they are making money...

http://www.early-retirement.org/forums/f28/4-99-penfed-home-equity-loan-32033-2.html message 26

long as they want to keep loaning at those rates and paying at those rates I'm a happy happy boy. It allows us to keep a chunk = to what we owe on the house in savings at no cost as a safety cushion. Inflation or deflation have no effect since we owe and earn about the same amount and the cushion just sits there. Thanks PenFed!

O - they're paying us 4% APY, so thats a bit better than we pay them. of course they rack up some fees up front on the loan, so they probably do a tiny bit of profit for themselves, but not going to begrudge them that...

 

[CCdaCE]

Didn't last long... 5/5 ARM is back to 4%.

-CC

 

[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]

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.