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Topic: The truth about subprime mortgages. (Read 537 times) |
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thomas
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The truth about subprime mortgages.
« on: Feb 27th, 2008, 6:26pm » |
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http://docs.google.com/TeamPresent?docid=ddp4zq7n_0cdjsr4fn&skipauth =true
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pattik
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Re: The truth about subprime mortgages.
« Reply #1 on: Feb 27th, 2008, 8:25pm » |
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That's a good cartoon, Thomas. What a giant mess this is! Everyone has been greedy right up the line, and now the rating agencies are caving. I saw this little video a while ago which addresses some of the same issues for dummies like me (I'm one of the dummies who saved and scraped for the 10%
down payment for my mortgage). 
http://www.cnbc.com/id/15840232?video=637208904&play=1
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E-Double
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Re: The truth about subprime mortgages.
« Reply #2 on: Feb 27th, 2008, 8:35pm » |
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When we were buying our house we went with a broker who was a friend of ours that I go back easily 12 yrs with.....
We both had credit ratings in the high 700's which is superb and could have gotten a decent reate for astandard mortgage.
My friend convinced us to go with a COSI loan (cost of savings index)
rational was based on my income back then whihc was great and that using that type of loan we could pay off our house in half the time......
Well shit hit the fan and OMG did it balloon....
We are about to close on a fixed rate mid 5's than g-d
we have been dealing with a different guy who has been wonderful and has educated us.
Niether of us knew that the type of loan we took was subprime neg-amoratization(sp?) and when trying to refinance most banks were looking at that and not the fact that we both have near perfect credit. Turns out to be a loan that people take if credit is poor.
We got F-ed
I hope that it wasn't intentional on my friends behalf.
I pray for that.
anyway...my contribution to a thread 
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Jonny
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Re: The truth about subprime mortgages.
« Reply #3 on: Feb 27th, 2008, 8:52pm » |
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I bought my house in 1999, 30 year fixed at 6.78
Im now at 4.62 and the house will be paid off in 11 years.
Plus, on top of that I took 30K out of equity when shit hit the fan a few years ago at my shop.
Not bad for a beer drinker, eh?.....LMMFAO 
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George_J
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Re: The truth about subprime mortgages.
« Reply #4 on: Feb 27th, 2008, 9:24pm » |
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We bought our house in 1984, and finished paying it off about two years ago. It's a pretty small house, really--but it's all we need.
Home prices were a lot lower then, and although the interest rate stunk up the place in the early eighties (7.6 percent, or something like that), we refinanced when the rates dropped, and converted from a thirty-year fixed to a ten-year fixed at 4.65 percent.
Not trying to brag, but it worked out pretty well. It's a fine thing to sneer at the bank.
So--heck. We aren't sitting on hundreds of thousands in equity, but we didn't take on something we couldn't handle. And now it just belongs to us, which is nice.
I don't think a lot of people do that anymore.
Most of the action with subprime mortgages, and loans with little or no down payment around here were generated for people who were speculating in real estate and "flipping" houses during the recent nuttiness. That may not be the case everywhere.
Now the borrowers are left holding the bag, unless they just walk away from the properties--and why shouldn't they? They don't have any money in them.
I mean--what were they thinking? (Banks and speculators both. ) Real estate's going to continue to go up in value at 20 percent a year--forever?
Bubble, bubble, bubble.
Glad I stood on the sidelines.
Best wishes,
George
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Melissa
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Re: The truth about subprime mortgages.
« Reply #5 on: Feb 27th, 2008, 9:32pm » |
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Jesse refuses to do anything but a fixed mortgage. We have a 20yr at 6 3/8ths at the moment and are hoping to refinance with cash out at 1 point less, hopefully sometime soon!!
Eric, so sorry you got stuck with that, that just sucks!
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Jonny
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Re: The truth about subprime mortgages.
« Reply #6 on: Feb 27th, 2008, 9:36pm » |
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Here in Boston someone gave a teachers assistant a loan for $470,000 for a house.
As Joe would say, "Thats messed up!"
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Cathi_Pierce
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Re: The truth about subprime mortgages.
« Reply #7 on: Feb 28th, 2008, 10:48am » |
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Mortgages are risk-based. The smaller the risk, the better the rate. That will not change. What HAS already changed is that people who, in the past, simply managed to fog a mirror could get a loan. Not a good one, but nontheless, a loan. Mortage companies are going back to the good ole guidelines. Full documentation, income verification, no neg-am, and decent interest rates. The American Dream, from where I stand is more attainable now. A straightforward 30 year fully amortized loan....you can always pay it off earlier if you have the $$, but you know your pymts will not fluctuate......and that good ole down payment-which will only be 5-10%-which is appropriate. Think about it....you buy a car, you have to have a down......SOME of your OWN $$, which makes it far less likely that you will walk away from your house....ALL of this keeps the risk down, hence the cost stays lower.
For those thinking of buying a home, get a Good Faith estimate from a Mortgage Broker, a Bank lender(this would often be your 'home bank'......and a referral/friend. Take all 3 to your Realtor, and discuss the merits and pitfalls of each Estimate. Lenders are not equal.
E-dub, I am really sorry your friend set you up in a bad loan-and really glad you are doing a refi. Lenders make a commission on the 'back end' of a loan sometimes, and the subprime opens lenders up to all sorts of 'creative financing'........sadly, the lenders were happy to make extra money of these.....I hope that  was not the case with your friend. Greed doesn't benefit anyone!
Final statement, look to FHA for insured mortages. Low downs, decent rates and generous on credit scores. It's the old, tried and true lending, and, simply put, your BIGGEST investment is NOT where you want to take any risks,,,,,,,Now, go out there and regenerate our economy!!
(BTW, George, this is a public announcement for anyone
who needs to hear it..........IT IS UNAMERICAN TO LIVE IN ONE'S HOME FOR MORE THAN 3 YRS. BE PATRIOTIC- BUY A NEW HOUSE!)
Your Friendly Realtor,
Cathi 
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Paul98
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Re: The truth about subprime mortgages.
« Reply #8 on: Feb 28th, 2008, 11:07am » |
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on Feb 27th, 2008, 9:32pm, Melissa wrote:Jesse refuses to do anything but a fixed mortgage. We have a 20yr at 6 3/8ths at the moment and are hoping to refinance with cash out at 1 point less, hopefully sometime soon!!
Eric, so sorry you got stuck with that, that just sucks! |
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Mel-
Do some homework and calc. what you would save by paying ~$50-100 more each month (if you can do it) towards the principle. I did this and it cut a 30 year fixed down to 13 years and negated any savings in the differential in rate (9.5% down to 7% at the time) and saved because I didn't have to shell out refinance costs. I made the last payment on my home back in 2001. Now I rent my home from the town and county! LOL (it's called PROPERTY TAXES)
-P.
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Melissa
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Re: The truth about subprime mortgages.
« Reply #9 on: Feb 28th, 2008, 11:16am » |
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Paul, we do pay an extra $50 a month on the principal, it's just that we need to refinance w/cash out due to the baby coming and needing to consolidate.
He would like to do a 5 yr balloon in 10 yrs though (or 1/2 of what the loan is for, whichever comes first). So we'll see.
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Sandy_C
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Re: The truth about subprime mortgages.
« Reply #10 on: Feb 28th, 2008, 1:19pm » |
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Mel, some food for thought.
If you refinance your existing mortgage and cash out, meaning you are basically taking the equity value on the house and putting it in your pocket to pay off debts, hospital bills, etc, what you will be doing is actually increasing the total mortgage balance on the property.
Example: Let's say you have a mortgage balance of $100,000, and your house appraises for $150,000. You have $50,000 in equity in that property.
If you refi with cash out, you will be taking a new loan, hopefully at a lower interest rate, but your loan new balance will be higher. They will not allow you to take the full 100% of your $50,000 equity, probably around 75%, so the cash you will put in your pocket would be $35,000 in our scenario.
So now, you have a mortgage balance of $135,000 (first $100,000 plus cash out), leaving only $15,000 in equity left on the appraised value of the property. Unless you are getting an interest rate a good 2% points below the rate you are now paying, it might not be worth it considering you are now paying on a $135,000 mortgage instead of $100,000, plus you will pay closing costs for the refi. Yes, you have $35,000 in your pocket, but you are paying for it right now.
Here is where I say "food for thought"
Using the same scenario, current mortgage balance of $100,000, equity in the home $50,000. Refinance the first mortgage ($100,000) only at a lower interest rate. Then, take an equity line of credit out on the $50,000 equity you have in the home. Again, they will probably only let you have 75% of the equity ($35,000). But, the difference is, now, you are going to make lower mortgage payments on the first, but you don't have to pay one dime on the equity line, until you use it. You've got a $35,000 checking account, with that cash available to use when you need it. Unless you need all $35,000 of it right now and have to pull it all immediately, you only need to pay on the amount you actually use. So why pay a $135,000 mortgage for the next 20 or 30 years, when you can pay a $100,000 mortgage for 20-30 years, and only pay the equity line for as much as you use?
Plus, interest you pay on the equity line is fully tax deductible because once you use some of the money, it becomes a 2nd mortgage.
I sorry if I sound "preachy", but please think long and hard before doing any type of a balloon mortgage. What a balloon mortgage means is that in 5 years, or 10 years, however you set it up, the mortgage needs to be either refinanced or you have to pay off the balloon balance. Unless you've got a bunch of cash in your pocket to pay off the balloon, refinance is the only option. Nobody knows what the housing market will be, or the interest rates will be in 5 or 10 years from now when that balloon comes due. Also, God forbid, what if something catastrophic happens....Jesse loses his job, someone has major medical bills, and the market is down, interest rates are up, and you don't have the money to pay off the balloon, and you can't refinance at favorable rates, or the house does not appraise where you need to? What do you do? I know this sounds like worst case scenario, but, are you willing to risk it?
The housing "bubble" is a reality and property values are declining pretty much everywhere. Everybody used to believe that houses always appreciated in value every year. No more.
Three years ago we refinanced our mortgage and had the property appraised. Since that time, we have completely remodeled and upgraded the kitchen, all new bathrooms, new flooring throughout the house (hardwoods and tile), approximately $30,000 in upgrades. Just had the property re-appraised. It's about the same as it was three years ago, even with the upgrades, so, in essence, we lost value, and we live in a very desirable area, good schools, close to transportation, etc. This is why we bought it originally.
Obviously, I've spent more than my two cents here, and I apologize. In my almost 62 years of life, I've been burned twice on selling a home because of housing market trends and interest rates at the time we needed to sell. I just don't want anyone else to make the same mistakes that we did. So investigate all options and don't make any decisions until you've got the actual dollars written down for you, and look at the long term, not just the short term.
Love ya
Sandy
Darn, this is long. I'm sorry
Edited because I forgot something I wanted to say and had to get wordier! Sorry
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| « Last Edit: Feb 28th, 2008, 1:29pm by Sandy_C » |
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Melissa
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Re: The truth about subprime mortgages.
« Reply #11 on: Feb 28th, 2008, 10:17pm » |
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Sandy, that's just too much for me to absorb right now. I'm sure things will change down the road, we have many years before we decide what we're going to do.
Thanks for being concerned though. Love u.
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superhawk2300
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Re: The truth about subprime mortgages.
« Reply #12 on: Feb 29th, 2008, 11:51am » |
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on Feb 27th, 2008, 8:35pm, E-Double wrote:| When we were buying our house we went with a broker who was a friend of ours that I go back easily 12 yrs with..... |
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Same thing with us and we ar hurting now too. Turns out our guy THOUGHT he knew what he was doing; I don't think he did it on purpose.
Either way we really haven't spoken for quiet a while........ I won't do business like this with friends again probably.
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monty
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Re: The truth about subprime mortgages.
« Reply #13 on: Feb 29th, 2008, 1:28pm » |
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on Feb 28th, 2008, 11:07am, Paul98 wrote:
Mel-
Do some homework and calc. what you would save by paying ~$50-100 more each month (if you can do it) towards the principle. I did this and it cut a 30 year fixed down to 13 years and negated any savings in the differential in rate (9.5% down to 7% at the time) and saved because I didn't have to shell out refinance costs. I made the last payment on my home back in 2001. Now I rent my home from the town and county! LOL (it's called PROPERTY TAXES)
-P.
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Good idea. We try to pay an extra 10% each month - we take the normal payment, shift the decimal point one place, and add that to the check. I forget the exact numbers, but if we keep that up, we will save a lot of money (well over a hundred thousand) and pay the loan off early.
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The outer boundary of what we currently believe is feasible is far short of what we actually must do.
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Paul98
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Re: The truth about subprime mortgages.
« Reply #14 on: Feb 29th, 2008, 1:39pm » |
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on Feb 29th, 2008, 1:28pm, monty wrote:
Good idea. We try to pay an extra 10% each month - we take the normal payment, shift the decimal point one place, and add that to the check. I forget the exact numbers, but if we keep that up, we will save a lot of money (well over a hundred thousand) and pay the loan off early.
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I think I paid ~ 15% more to be applied towards the principle. It dosn't take much to realize huge savings and years and years off the life of the loan.
Most folks don't realize refinancing at a lower rate is not allways the best or most prudent option. Unless your belt is down to the last notch, you can always find $ somewhere.
-P.
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Cathi_Pierce
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Re: The truth about subprime mortgages.
« Reply #15 on: Feb 29th, 2008, 5:43pm » |
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Hey, Gang,
It's proven! Just 1 extra payment(P&I) per year, will cut a 30 yr mortgage to 17 yrs. The first few of your mortgage are mostly interest. Specify, when you make an extra payment, that it is a principle reduction-that means it comes right off the top of your actual balnce of the loan.
My suggestion to buyers is to do a 30yr fixed and throw anything you have extra into a principle reduction. fact is, the lesss time you have that loan, the less interest you will pay........and DO NOT use your home as a piggybank....BUILD the equity in it, that way if there IS a "rainy day", you have a sizable cushion to fall back on!
And, yes, the bottom CAN fall out, but it rarely does. Be conservative with your housing expenses. That's just not the place to take risks.
(putting my soapbox away now)Cathi
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