Homestead mailing list

["Lisa K.V. Perry" <lisakvperry AT gmail.com>]

On 7/22/06, Gene GeRue <genegerue AT ruralize.com> wrote:
> Re-refinancing, and Putting Off Mortgage Pain
> By VIKAS BAJAJ and RON NIXON
> Published: July 23, 2006
>
> "Some people would say I am a little crazy,"
> acknowledged R. Lance Perry, 42, of Danville,
> Calif., one of the new breed of people
> refinancing their mortgages. But faced with a
> sharp increase in his monthly payments and a need
> to take cash out of his home, he refinanced
> earlier this year to keep his payments the same.


What a quote. I am not related to this guy.  He's not taking into
consideration the finance costs.  The article says he took out $200k for a
new home business (on top of what else he owes--gulp), using an average of
3% for closing costs, that is $6k (4%+ is normal depending on state & county
taxes, lender fees, attorney and appraiser fees, orgination fees, misc.,
etc.).  He just spent $2k per year on what is probably a three-year A.R.M.
to keep his payments low.  (ARMs come in a variety of time from six months
to 1, 3, 5, 7 or 10 years, three-year ARMs are the most popular.)

By the time the rate goes up, he figures, his
> income will have increased enough to cover the
> higher payments, he will have refinanced again or he will have moved.


Incomes are stagnant.  They are not going up.  If he refinances again,
there's more money down the drain.  If he moves, that's another expense.
Anyone who has ever moved knows it costs way more than you'd think.  This
guy likes to spend money.

Now, the first big wave of the mortgage boom is
> cresting as more than $400 billion worth of
> adjustable-rate mortgages, or about 5 percent of
> all outstanding mortgage debt, will readjust this
> year for the first time, according to Loan
> Performance, a research firm. Next year, another
> $1 trillion in loans will readjust.


I know a few brokers who are excited for the coming refinance boom from ARMs
back to fixed-rate loans, but if the trend is from ARM to ARM?  This doesn't
make sense to me at all.

Lisa