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homestead - Re: [Homestead] Real estate financing, July, 2006

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  • From: "Lisa K.V. Perry" <lisakvperry AT gmail.com>
  • To: homestead AT lists.ibiblio.org
  • Subject: Re: [Homestead] Real estate financing, July, 2006
  • Date: Sat, 22 Jul 2006 16:52:10 -0400

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




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