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John, did this guy actually use the words "vig" or "juice" during this conversation?

 

If you're at 8.5% and haven't refi'd... huh?? I'd be trying like hell to clamp down a fixed rate in the 5's. It's incredible to me that we're scraping historical low interest rates and people are even considering these whack-job ARMs and interest-only loans for their main residence.

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John, did this guy actually use the words "vig" or "juice" during this conversation?

 

If you're at 8.5% and haven't refi'd... huh?? I'd be trying like hell to clamp down a fixed rate in the 5's. It's incredible to me that we're scraping historical low interest rates and people are even considering these whack-job ARMs and interest-only loans for their main residence.

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Thank you.

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John, did this guy actually use the words "vig" or "juice" during this conversation?

 

If you're at 8.5% and haven't refi'd... huh?? I'd be trying like hell to clamp down a fixed rate in the 5's. It's incredible to me that we're scraping historical low interest rates and people are even considering these whack-job ARMs and interest-only loans for their main residence.

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I support ARM's in the case of folks who know they are going to be leaving their residence shortly. Even so, the average American stays in their house for 8 years. If you take a 7/1 arm then you are effectively getting a lower rate than the fixed rates and hedging your bets that you'll be a hot pocket American and be out of your house in five to seven years.

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I support ARM's in the case of folks who know they are going to be leaving their residence shortly. Even so, the average American stays in their house for 8 years. If you take a 7/1 arm then you are effectively getting a lower rate than the fixed rates and hedging your bets that you'll be a hot pocket American and be out of your house in five to seven years.

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The bottom line is: understand your situation and get the type of mortgage that best fits it. ARMs, interest only loans, traditional mortgages all have their place, but you have to know which one suits you best. And no bank is going to do it for you...

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The bottom line is: understand your situation and get the type of mortgage that best fits it.  ARMs, interest only loans, traditional mortgages all have their place, but you have to know which one suits you best.  And no bank is going to do it for you...

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Right on.

 

I think I always put our members in the best situation possible.

 

Use your credit unions!!!!!

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OK I will try my best to explain my situation

 

- I plan to friggen DIE in this house......I love Hemet....it is a nice house and I have done a ton of work to it.

 

- Me and my wife know absolutely nothing about what we are doing (I have come to realize that just by reading this article and the posters here...;)

 

- We fall into that category of that article that beleive that being debt free when we retire is a good thing and will do everything possible to make that happen....it looks like someone came into our house and preyed upon that (I will tell you what....8.5 percent was actually what the interest rate was when we got done haggling...they wanted to charge us over 9 percent in the beginning)

 

- THIS IS IMPORTANT...forgot to mention it....there is a prepayment penalty (I called yesterday and they said it is at $3700. If I move my loan UNLESS I refinance with an affiliate (by that I mean Citibank would probably be the only option) should I be doing any refi through them or does the $3700 mean anything in the big scheme of things?

 

- Given the fact that we aren't going anywhere....cant afford the mortgage we are in.....and I am willing to learn how to invest money I save (but it would have to be money above and beyond the savings I need month to month....which is what is causing me to start up this thread......

 

What would be the best type of loan for me....my credit union doesn't do home loans

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Being I've done this for the past few years I can give you a fairly qualified answer.

 

If you want to keep your house and don't feel adventurous find a fixed rate as low as you can at www.lendingtree.com and keep that loan unless the rates go way down again. They will compete for your rate and tell them you want it fixed. You will probably find a rate cheaper than 8.5. At least you will know know what the payment is going to be and if the rates go higher in 5 years you are safe.

 

If you want a lower payment go for the cheap low fixed rate, knowing that in 5 years the rates might be higher and you might be screwed. All refinances have closing costs associated with them and the lowest closing costs are a funding company called Ditech. Ditech does have low rates as well, and the lowest closing costs.

 

If you ever sell your house go cheapest now because paying your loan in a bigger payment is not smart as most equity is built by appreciation rather than paying off a mortgage. If you plan on keeping it find a great fixed rate and have lenders give you competitive quotes. Tell them what the other one is offering to see if they can beat your last quote if you fill out an application at lendingtree.com (I've done this myself and worked great), and then work out a plan to make half the mortgage payment 2 weeks early to accelerate your mortgage (it shaves off 7-9 years).

 

Good luck

 

P.S I'm the adventurous type that buys and sells so I go cheapest payment and flip property. I would recommend going fixed the life of the loan, not in 5 yr spurts

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OK I will try my best to explain my situation

 

- I plan to friggen DIE in this house......I love Hemet....it is a nice house and I have done a ton of work to it.

 

- Me and my wife know absolutely nothing about what we are doing (I have come to realize that just by reading this article and the posters here...:P

 

- We fall into that category of that article that beleive that being debt free when we retire is a good thing and will do everything possible to make that happen....it looks like someone came into our house and preyed upon that (I will tell you what....8.5 percent was actually what the interest rate was when we got done haggling...they wanted to charge us over 9 percent in the beginning)

 

- THIS IS IMPORTANT...forgot to mention it....there is a prepayment penalty (I called yesterday and they said it is at $3700. If I move my loan UNLESS I refinance with an affiliate (by that I mean Citibank would probably be the only option) should I be doing any refi through them or does the $3700 mean anything in the big scheme of things?

 

- Given the fact that we aren't going anywhere....cant afford the mortgage we are in.....and I am willing to learn how to invest money I save (but it would have to be money above and beyond the savings I need month to month....which is what is causing me to start up this thread......

 

What would be the best type of loan for me....my credit union doesn't do home loans

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Is Hemet in California?

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I don't like the article because it goes against the grain of sound historical banking rules. Especially advocating using mortgage financing to pay for credit card & auto debt. A classic shift of using a hard asset to pay for quickly depreciating assets. That is bad advice.

 

I'll buy the idea of taking equity out of the house to gain the investment arbitrage. But, you have to be ultra diligent to ensure that your returns beat your borrowing rate (and outpace the upcoming house value deterioration)

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- I love Hemet....

My wife has relatives in Hemet. I've been to Hemet. I've never heard anyone who has been to Hemet say they love Hemet.

 

Me and my wife know absolutely nothing about what we are doing

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Which probably explains why you love Hemet. :P

 

(Sorry, dude. Just bustin' balls.)

 

By the way, how long have you had this mortgage with Citibank. Some pre-payment penalties are based on a timeline and they could just be telling you this to keep you in your loan. Double check this, then get out of that freakin' loan and get that rate down right away.

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you missed the point of the article.  The object is to accumulate wealth, not eliminate debt.  Tiger Woods doesn't care if he has a $20M mortgage because Tiger Woods has accumalated enough wealth to handle his debt.

 

So, all that money you have invested becomes your income when you retire.  Remember these are EXTRA investments (in leiu of paying off your mortgage).  This money can then be used to pay your bills.  You can't pay your bills if you stuffed the money in the walls of your house.

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In rounded #s

I'd rather spend the extra $4,080 (before taxes) a year to make my payments on a 15 year mortgage than have a 30 year mortgage & still owe $105,000 on my house with an $885 mortgage for the next 15 years when I retire. In order for me to break even using the $4,250 (includes income tax break differences)per year to invest, I'd have to get a 6.76% Return On Investment. I don't know where I can get a certain, zero risk 6.76% per year ROI. However I do know that by spending that extra $4,250 I'm not investing, I've assured myself of an extra $885/month or an extra $105,000 (rounded) in my pocket if I sell. By paying my mortgage with a 15 year loan @ $1,225/mo instead of a 30 year loan @ $885/mo, I am building wealth-I've got a present value of $105,000 in 15 years by "investing" an extra $340/mo into my mortgage. ...and that extra $885/mo (or $105,000 in my pocket) certainly will go a long way towards paying my bills.

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In rounded #s

I'd rather spend the extra $4,080 (before taxes) a year to make my payments on a 15 year mortgage than have a 30 year mortgage & still owe $105,000 on my house with an $885 mortgage for the next 15 years when I retire. In order for me to break even using the $4,250 (includes income tax break differences)per year to invest, I'd have to get a 6.76% Return On Investment. I don't know where I can get a certain, zero risk 6.76% per year ROI.

 

But to accept this - you are saying that having ready access to YOUR wealth has zero value. Money stuffed into the walls of your house is not readily available for your use.

 

 

However I do know that by spending that extra $4,250 I'm not investing, I've assured myself of an extra $885/month or an extra $105,000 (rounded) in my pocket if I sell.

 

"If you sell".... Ummmm, that's the whole point. That money is useless in times of need. Why would you want to be forced to sell your home to access your wealth? That $105k+ could be in a liquid investment somewhere.

 

 

By paying my mortgage with a 15 year loan @ $1,225/mo instead of a 30 year loan @ $885/mo, I am building wealth-I've got a present value of $105,000 in 15 years by "investing" an extra $340/mo into my mortgage. ...and that extra $885/mo (or $105,000 in my pocket) certainly will go a long way towards paying my bills.

 

That is like Ralph saying he is a billionaire because he owns the Bills. Well, Ralph needs to sell the team (or borrow against it) to realize that wealth.

 

Paying down your debt isn't bad, you will be better off than most people who don't save at all. But you are fooling yourself if you say it is the BEST thing to do with your money.

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I am a hemetian for live....:P

 

I called Citicorp when I started to get into this seriously...they told me that I would have a $3700 prepayment penalty.

 

In the big scheme of things....I dont know how important that is.

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If you have a prepayment penalty, I would definitely refi with "citi" unless their rates were a lot higher than others. I would assume that their mortgage rates would be within .25% of everyone else.

 

Prepayment penalties are legal and usually if you take one for 3 years, they will shave .25% off of your rate. Sometimes, they don't make it too clear that the rate you are offered has a prepayment penalty but it is always clearly written in your mortgage contract.

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