Anyone familiar with refinancing their house?

[n2mark]

I am meeting with someone who said they could give me a 3% or 2.5 % refinance on my house because of my excellent credit rating, I can pay off all my bills and save almost $700 a month. I got the impression this was special for seniors. Is this a scam?

[elehhhhna]

1. probably not BUT it's probably an ARM

[NC_Nurse]

2. Could be...

I haven't heard any rates even CLOSE to that recently. I would check out the company before I signed anything.

[Worst Username Ever]

3. It is probably a one-year ARM

meaning it can fluctuate after the first year. ARMS can be very appropriate depending on your situation, but be wary.

It could also be a reverse-amortization mortgage or interest-only mortgage. I would recommend neither.

[n2mark]

4. He told me my mortgage would not fluctuate and it is not

a reverse mortgage. Reverse mortgage was the first question I asked. He said I could pay my mortgage off in fifteen years.

[papau]

6. interest only at 3% locked for 15 years is a great mortgage - so I

doubt that is what is really on the table.

[papau]

5. That is a one year ARM - very dangerous - see what the rates are for

an interest only with a 5 year lock ARM IF LOWER PAYMENTS NOW IS THE OBJECTIVE. something very close to 5% should be available.

There are no Seniors only specials in mortgages!

A fixed rate mortgage around (just above or just under 6) should also be available

If you do go ARM - 5 year lock or just one year lock - check the max increase from year to year, the repayment penalty if any, the max interest rate, and the index that causes the changes to the interest rate under the contract. Good Luck!

:-)

[vdeputy]

7. Be Careful

I schedule foreclosure sheriff sales for the Sheriff's Dept. There are so many scams out there that my advice would be to check out the fine print VERY carefully. Some of the unscrupulous mortgage companies have clauses that do things like raise your interest rate if you are even a few days late, don't give the option to pre-pay etc. Or as the others have said, that may only be the rate for a while and then it automatically goes up. In fact, I'd be so cautious about it I'd probably go with a local reputable lender even if the rate is a little higher. They can usually get you somewhere in the same ballpark and you know you don't have to worry that they are on the up and up.

Vic

[FloridaPat]

8. Watch what your paying in terest and principal. I had a quote done.

They wanted to turn a 5 year mortgage into a 15 year mortgage. It would cost me $3500 in points for the loan. I would save about $700, but it is all going to principal. Ten more years on a loan would be a lot more expensive than paying it off in 5. Plus, if I took the $3500 and applied it to the mortgage, the interst payments were within $20 of being the same.

This is good for the banks. People that refinance their homes to pay their bills regret it more often than not. They pay off their bills and then run them up again. Now they're back where they started, but they have a much longer mortgage then before. Don't trade unsecure debt for secure debt.

If your're over 62, you can look into reverse mortgages. The bank pays you and takes possession of the home after you die.

[n2mark]

13. Will let you know Monday

on this.

[trof]

9. Very familiar. This ain't a 30 year mortgage.

Check out online deals. I did my last 3 refis that way with no probs.

[sbj405]

10. Check out the going rates for mortgages in your area

This seems really low. I would be careful.

[wryter2000]

11. That sounds very fishy to me.

Fixed rate mortgages should be around 6% now, even for folks with good credit.

[papau]

12. Bush English is used - the Web has 2% loans that are really 5% loans

*Rate is variable and subject to change. Interest-only for 10 years. The interest-only payment on a 30-year $200,000, 6 month Adjustable Rate Loan at 1.99% and 80% LTV would be $331.67 with .50 points due at closing. Rate will adjust every 6 months. After the initial 6 month period, the interest only payment is $791.67. Principal and interest payments due after 10 years. The Annual Percentage Rate is 4.837%. Rates could change daily. Actual payments will vary based on individual client situation and current rates. Not available in all states.

[n2mark]

14. I am going to do some real careful checking

Thanks

[yellowdogintexas]

15. sounds pretty fishy to me too. I just started working in this line of

business so I am learning a lot of new stuff, but this just don't sound kosher to me


What you end up doing on the refi is remortgaging what is left on your home for another 20 to 30 years, and since the principal is smaller and the interest rate is lower, you get a smaller monthly payment.

You can get your hig interest credit cards rolled into it, and zeroed out and take the tax deduction on that interest which you can't do if it is a regular credit card of course. You could also roll your car notes, etc and still come out with a lower monthly payment than your current car note

but you want to be sure there are no prepayment penalties, no fluctuating interest, no automatic interest increase if your payment is late, etc. A reputable mortgage company will be very up front with you about this.

A different alternative could be a Home Equity Line of Credit. the loan can be used to pay off credit cards, home improvements, college tuition, many things, and again the interest can be deducted from your federal income tax. The amount you can have is based on the difference between the appraised value of your home and the balance on your mortgage. So if your home was recently appraised at $120000 and you owe 90000 on it, you have up to $30000 available to you. Interest is generally based on prime plus a margin, the margin is determined by your credit history basically. Interest rate is set monthly by whatever the prime rate is and it has set parameters that can't be exceeded in either direction. So if it has a cap of 2 points above the initial rate and you start at 7% it can't go above 9%

This is very redimentary description but hopefully you get the general idea.

Sometimes these can be set up with a Master CArd style of account, instead of giving you a check for the loan amount. That way you only draw out what you need when you need it and you only pay interest on what you have actually used.

Or you can get them with courtesy checks, which you use to draft only what you need as you need it.

I just started a class in this type of loan so I am actually testing myself on what I learned the past two days. Also, this type of loan is not available in all states;

Let us know what you find out

[banana republican]

16. get an amortization of the mortgage

If it is a fixed rate there shouldn't be any problem. If it is an adjustable rate then he will not be able to give it to you.

also find out if this is a true mortgage or a line of credit. If it is a line of credit do *not* exceed $100,000 due to the tax implications.

See a CPA or an attorney/CPA if you have questions. Do your best to find someone who understands the tax implications e.g. a CPA with a Masters Degree in Tax; an Attorney/CPA with an LLM in tax. The tax aspect is important especially if this is a line of credit.

Expect fees for "good" CPA's to range in the $100 to $200 per hour. Think about it; $200 may save you $100,000 in bad mortgage advice and your home.