it's veiled...you know how much Fannie and Freddie have paid the gov't since they took it over? No way they are giving up that revenue...and the chaos that would be created if it was privatized would be insane. I don't see it happening anytime soon.
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- Thread starter SoapyCy
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it's veiled...you know how much Fannie and Freddie have paid the gov't since they took it over? No way they are giving up that revenue...and the chaos that would be created if it was privatized would be insane. I don't see it happening anytime soon.
it IS possible for the bank to sell this servicing at some point. There are centralized servicers in each FHLB region. Many community banks do keep this as a source of revenue...the issue that does arise is that servicing a loan isn't just collecting a payment and it can often become cumbersome for a small bank to manage.
the vast majority do it fairly well but there are a number of banks who regularly inquire about selling servicing. the bank is also on the hook for the risk associated with the loan in this case...one buy back due to delinquency, fraud, misrep or abandonment can wipe out the revenue for a whole year pretty quick.
great program though...agreed.
That seems high for a cash out refi depending on 15 vs 30yr. We were quoted between the range of 2.625-2.75 for our cash out refi on 15 year loans.
I thought I went to a good bank but I guess not. I'm not dissatisfied at all, just a little sad I didn't plan as well as I could have. I refinanced 100k and could have taken out another 50k in equity at that low rate to invest. I don't have any other bills so I guess I'm not missing out on too much.
I know what you mean. I would have loved to get that 2.3% rate but in the end, still coming out way ahead.
Generally not advisable to take equity out of collateralized / leveraged assets for purposes of investing in non-collateralized and riskier assets like equities. That's a recipe for losing one's primary residence and being put out on the street. The housing bubble of 2008 was supposed to be an expensive lesson on the risk of treating a basic need like the roof over your head as a piggy bank.
If someone could pay off their house today by selling stocks would you suggest they do that? Isnt that essentially the same thing?
I don't see it as the same thing. Because you're talking about taking a new, cash-out mortgage LOAN which is backed by the collateral value of the property. That's the paper risk which the lender is covering by holding the note. If the value significantly depreciates, or you default on payments, the lender can foreclose to recover whatever intrinsic value remains. And you are out your principal equity AND without a roof overhead.
If instead you lose the entire value of your stock / equity asset investments, the risk is capped at that. You don't lose your home to boot. (Short-selling and margin investing notwithstanding.)
Similar principle to why borrowing from a 401k is a losing proposition - the penalty for repayment / loss risk is often greater than the original value received.
It all comes down to risk, and I'm just advocating against a strategy that trades borrowed equity from collateralized debt to chase a potential better return.
I understand what you're saying, and I'm just making conversation. Let's use hypotheticals.
If my mortgage is $100,000 and I have more than $100,000 in a taxable brokerage account, isn't that essentially the same thing as taking out a loan on a paid-off house to invest. In one hand you have money in the market and the other hand you have a mortgage. How you got each of them is irrelevant. If I sold $100,000 of stock I would have a house without a mortgage. If I kept it all invested and the market goes down I wouldn't have $100,000 to sell and pay off the house. The same exact scenario you describe above.
Isn't it just a level of risk? In this example, I'm betting the market returns over years will be greater than the 2.X% rate I owe on my mortgage. How is that different than taking out a new mortgage on a paid-off house for the same risk?
be careful comparing cashout rates...c/o is combined with FICO and LTV to determine LLPA's on your rate. What I may get quoted from the same bank might be different than what you get quoted. Risk factors matter.
Just closed on a new 30 year at 2.875%. Savings for us of about $300 a month. Will continue paying that to the loan to pay down more quickly. Considered a 15 at 2.375% but wanted the flexibility in the end.
Those of you in MN still looking to refi, check out Think Bank. Very competitive rates.
Those of you in MN still looking to refi, check out Think Bank. Very competitive rates.
I'd suggest you read the book "The Big Short." I don't think you're assessing risk properly with an asset that is also a basic life necessity.
I'm going to talk to a refinance officer tomorrow to see if it sounds like a good idea for my situation.
Unfortunately I don't have a ton of equity my home yet and I still have PMI. My original 30 year mortgage rate is 4.125%, and I have 27 years left. I do think my home value has increased a bit, and we just fenced in the back yard ($3600, paid for) and put in a new HVAC system ($9100, financed, about $8k left).
Ideally, I am hoping to get an interest rate at 3% or less on a new 30 year refinance AND get rid of PMI, but not sure if that will fly. My banker friend said it might be possible, perhaps with a slightly higher interest rate. It will depend on what that interest rate would be with or potentially without PMI, and what the closing costs are. I can afford to pay for some closing costs out of pocket as long as it's within reason. I'm hoping I can just use whatever my saving ends up being on my monthly payment as additional payment on the principal moving forward, so I'd pay it off sooner.
Based on my limited knowledge and initial rough estimates, I think my break even point is around 2.5-3.5 years. I do think I will be in this home for another 3 years minimum, but maybe not after 5 years. 10 years, probably not. But my salary is increasing and as I am paying off other debts I can begin to make extra payments on principal to get it paid down.
Unfortunately I don't have a ton of equity my home yet and I still have PMI. My original 30 year mortgage rate is 4.125%, and I have 27 years left. I do think my home value has increased a bit, and we just fenced in the back yard ($3600, paid for) and put in a new HVAC system ($9100, financed, about $8k left).
Ideally, I am hoping to get an interest rate at 3% or less on a new 30 year refinance AND get rid of PMI, but not sure if that will fly. My banker friend said it might be possible, perhaps with a slightly higher interest rate. It will depend on what that interest rate would be with or potentially without PMI, and what the closing costs are. I can afford to pay for some closing costs out of pocket as long as it's within reason. I'm hoping I can just use whatever my saving ends up being on my monthly payment as additional payment on the principal moving forward, so I'd pay it off sooner.
Based on my limited knowledge and initial rough estimates, I think my break even point is around 2.5-3.5 years. I do think I will be in this home for another 3 years minimum, but maybe not after 5 years. 10 years, probably not. But my salary is increasing and as I am paying off other debts I can begin to make extra payments on principal to get it paid down.
A cash out refi to something like 80% LTV and using the proceeds to invest is not going to cost someone their house.
We're not talking subprime mortgages, so unless I'm missing something, I'm confused on the Big Short comparison.
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Amazing , 30 at 2.25% , 15 below 1.99% , use cash out to borrow money so cheap and pay your high interest debt.
We refinanced to a 15 yr at 1.99% (from 15 yr at 3.5%). Rates were down from there for awhile, not sure where at now
I'm still happy with the 2.25% I got on a 15 year back in November. Crazy they went even lower but was just glad to get out of the 30 year I had at 4.3% and basically know of 2% and 8 years of the loan I had. If we get any more Rona checks will just use it to keep paying down on the total as would like to have it paid off within 10 years regardless. I would expect that rates are going to continue to stay low until we get out of this pandemic and we see some recovery so still plenty of time to refinance if you haven't.