Wednesday, June 20, 2007

Thinking about Refinancing???


Yes, I said Hype!!!!

Whether its on a podcast or a newscast on CBS, everyone has heard about the rise in interest rates and the impending doom for all those "risky" mortgages(see previous post!!).

But did you know that one of scariest elements of this dilemna is the new mortgage?

Yes, you hear about Lending Tree and others providing outstanding rates below 6% in a 6 5/8 to 6 7/8 interest market. If you are like me, you get three to five offers from unheard of mortgage companies willing to transition your adjustable rate(ARM) mortgage into a fixed note for under 3%.

If you call the 800 number (if your lucky one is provided) to learn more, you will find that 3% rate(for this example) is fixed for 6 months and moves with the market. Sounds like a decent risk as one is saving almost 4 points versus the present market....until one considers the direction interest rates are going and the trend for stocks and 10yr bonds and other factors that don't lend one to believe rates will come south.

In addition, if you ask, you will also find that your loan amount may be increasing each month as the financing company(are they a bank lending their own need to ask!) tack the unpaid but accrued interest for a 7% or higher note value.

Here's an example of what could be happening.

Your loan is $200,000 at 3% based on 30 yr amoritzatioin with a payment of $843.21(Principal and Interest).

The bank needs 6 7/8% rate on the mortgage so it accrues the difference between the 3% basis
and the 6 7/8% basis or $470.65 into the loan.

Thus, in month 1 of the loan, you make a payment of $843.21 and your loan would stand at $200,470.65. In month 2, you still make a 843.21 payment if the interest rate doesn't change and your loan balance goes to $200,944.39.

Now this sample may not match every loan offer you get in the mail or that an internet option like Lending Tree might provide, yet be careful!!!! You can see a great offer in the mail or on the internet that are very fine...that is how Lending Tree and the like grew...just need to investigate the loan being offered to ensure you know you are getting what you need.

And if you have any doubt about if the loan offer could be for real, ask for a Truth in Lending statement on the loan and take it to or email to your present mortgage company. If you aren't sure your current mortgage company would be willing to help or you just don't happen to like them, email me at and I will hook you up with a great loan officer that sees your needs as his/her job to fulfill.

Our Homes are our Safe Havens!!! Just ensure the mortgage that you pay doesn't ruin you!!!
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