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Have Interest Only -- Should I Refinance to 30 year Fixed?
My wife and I refinanced our house back in Feb (2005)to an interest
only loan. At the time we only planned to stay in the house for 1 - 3 years. Now we think we may be there longer and are questioning the wisdom of going with an interest only loan. So, my questions a 1. would it damage our credit to refinance again so soon? 2. would the extremely short time we've had the mortgage (5 months) make lenders hesitant to do business with us? Thanks in advance! |
"sactomike" wrote in message oups.com... My wife and I refinanced our house back in Feb (2005)to an interest only loan. At the time we only planned to stay in the house for 1 - 3 years. Now we think we may be there longer and are questioning the wisdom of going with an interest only loan. So, my questions a 1. would it damage our credit to refinance again so soon? 2. would the extremely short time we've had the mortgage (5 months) make lenders hesitant to do business with us? Thanks in advance! no no |
Thanks for the response, Charles.
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In article .com,
sactomike wrote: My wife and I refinanced our house back in Feb (2005)to an interest only loan. At the time we only planned to stay in the house for 1 - 3 years. Now we think we may be there longer and are questioning the wisdom of going with an interest only loan. So, my questions a 1. would it damage our credit to refinance again so soon? 2. would the extremely short time we've had the mortgage (5 months) make lenders hesitant to do business with us? Probably not a problem to refi, but you can avoid the paperwork hassell and closing costs by just figuring out how much extra you can afford to put toward the house without straining financially and add that much to each payment as payment toward the principal unless the loan docs forbid this (unlikely but possible). I would suggest calculating the mortgage payments and keeping close track of it yourself to avoid the bank screwing it up. -- Rich Greenberg Marietta, GA, USA richgr atsign panix.com + 1 770 321 6507 Eastern time. N6LRT I speak for myself & my dogs only. VM'er since CP-67 Canines:Val, Red & Shasta (RIP),Red, husky Owner:Chinook-L Atlanta Siberian Husky Rescue. www.panix.com/~richgr/ Asst Owner:Sibernet-L |
Rich Greenberg wrote: Probably not a problem to refi, but you can avoid the paperwork hassell and closing costs by just figuring out how much extra you can afford to put toward the house without straining financially and add that much to each payment as payment toward the principal unless the loan docs forbid this (unlikely but possible). I'd agree with this advice, unless you have an interest only ARM and the adjustable part is the main reason you want to go fixed rate. While we're on the subject, I got a dumb question. If you add principle to an interest only payment, are your future mortgage bills reduced to reflect this? Or does the amount required stay the same but a small part is now principle? |
sactomike wrote:
My wife and I refinanced our house back in Feb (2005)to an interest only loan. At the time we only planned to stay in the house for 1 - 3 years. Now we think we may be there longer and are questioning the wisdom of going with an interest only loan. So, my questions a 1. would it damage our credit to refinance again so soon? 2. would the extremely short time we've had the mortgage (5 months) make lenders hesitant to do business with us? Thanks in advance! "Credit rating" is a ploy used against those seeking loans and whatnot. If you know you are good for it, don't accept any junk loans because they claim you are not. 1. Yes. Just to inquire about another loan 'damages' your credit. They will tell you anything if they think they can get more money out of you. Each inquiry from a lending agency will appear on your record and the lenders will claim this is a negative. If you find a reputable lender they will ignore this. 2. Yes they will claim so if they think they can get more money out of you. If they start talking about how bad your credit is, its time to find a new lender. I can't imagine a situation where an interest only loan is good. -- Respectfully, CL Gilbert |
"CL (dnoyeB) Gilbert" wrote in message ... sactomike wrote: My wife and I refinanced our house back in Feb (2005)to an interest only loan. At the time we only planned to stay in the house for 1 - 3 years. Now we think we may be there longer and are questioning the wisdom of going with an interest only loan. So, my questions a 1. would it damage our credit to refinance again so soon? 2. would the extremely short time we've had the mortgage (5 months) make lenders hesitant to do business with us? Thanks in advance! "Credit rating" is a ploy used against those seeking loans and whatnot. If you know you are good for it, don't accept any junk loans because they claim you are not. 1. Yes. Just to inquire about another loan 'damages' your credit. They will tell you anything if they think they can get more money out of you. Each inquiry from a lending agency will appear on your record and the lenders will claim this is a negative. If you find a reputable lender they will ignore this. 2. Yes they will claim so if they think they can get more money out of you. If they start talking about how bad your credit is, its time to find a new lender. I can't imagine a situation where an interest only loan is good. From what I have read, it's usually used in situations where the owner wants to use the extra cash to payoff loans or high credit card debt or in cases where they don't plan on living in the house for longer than a few years. Makes sense since in the first few years youy are paying mostly interest. -- Respectfully, CL Gilbert |
In article . com,
wrote: While we're on the subject, I got a dumb question. If you add principle to an interest only payment, are your future mortgage bills reduced to reflect this? Or does the amount required stay the same but a small part is now principle? I don't know. Your loan docs should say or call the customer non-service and ask. Even better call 3 times and see if at least 2 of the answers are the same. -- Rich Greenberg Marietta, GA, USA richgr atsign panix.com + 1 770 321 6507 Eastern time. N6LRT I speak for myself & my dogs only. VM'er since CP-67 Canines:Val, Red & Shasta (RIP),Red, husky Owner:Chinook-L Atlanta Siberian Husky Rescue. www.panix.com/~richgr/ Asst Owner:Sibernet-L |
On Tue, 19 Jul 2005 14:50:18 GMT, someone wrote:
Makes sense since in the first few years youy are paying mostly interest. Deconstruct that a little and it makes no sense: "since initially I would be paying mostly interest and little principal, therefore it is better that I pay all interest and no principal"? An int-only is just a way to increase leverage, as are things like 95 or 100 percent financing schemes, etc. Leverage magnifies both risk and returns If you believe that real estate can only go up, and you can ride out any short term bumps, and the property is merely an investment, go ahead and leverage it, similar concept to buying stocks on margin, etc. If OTOH the property is your home that you plan to live in, pay it off. Pay principal. Reply to NG only - this e.mail address goes to a kill file. |
"v" wrote in message ... On Tue, 19 Jul 2005 14:50:18 GMT, someone wrote: Makes sense since in the first few years youy are paying mostly interest. Deconstruct that a little and it makes no sense: "since initially I would be paying mostly interest and little principal, therefore it is better that I pay all interest and no principal"? Yeah, because you'll be pocketing the extra few hundred a month and can save it or invest it. An int-only is just a way to increase leverage, as are things like 95 or 100 percent financing schemes, etc. Leverage magnifies both risk and returns If you believe that real estate can only go up, and you can ride out any short term bumps, and the property is merely an investment, go ahead and leverage it, similar concept to buying stocks on margin, etc. If OTOH the property is your home that you plan to live in, pay it off. Pay principal. Reply to NG only - this e.mail address goes to a kill file. |
Rich Greenberg wrote: I don't know. Your loan docs should say or call the customer non-service and ask. Even better call 3 times and see if at least 2 of the answers are the same. Not me, I'd never get an interest only loan. Was just curious, it came up in coversation the other week. |
FDR wrote:
"v" wrote in message ... On Tue, 19 Jul 2005 14:50:18 GMT, someone wrote: Makes sense since in the first few years youy are paying mostly interest. Deconstruct that a little and it makes no sense: "since initially I would be paying mostly interest and little principal, therefore it is better that I pay all interest and no principal"? Yeah, because you'll be pocketing the extra few hundred a month and can save it or invest it. Where is this extra money coming from? Are you saying interest only loans give better interest rates? -- Respectfully, CL Gilbert |
On Tue, 19 Jul 2005 19:23:58 GMT, someone wrote:
Yeah, because you'll be pocketing the extra few hundred a month and can save it or invest it. Yes, but that is a stand alone statement: "I wish to have the lowest possible house payment so that I can have more money to invest" is fine, IF you want to play the leverage on the house. What is a complete non-sequitur is to attempt to justify this by adding that spiel about "since I'd be paying mostly interest anyway..." If you want max leverage, you don't been to say the 2nd part to justify the 1st part. But if you 'need' that justification, it doesn't hold water. Reply to NG only - this e.mail address goes to a kill file. |
"v" wrote in message ... If OTOH the property is your home that you plan to live in, pay it off. Pay principal. Why would you do this if you are making a higher rate with your money than you are paying on your loan? It seems like you would want to borrow as much as possible (everything else being equal). |
In article ,
"daslf" wrote: "v" wrote in message ... If OTOH the property is your home that you plan to live in, pay it off. Pay principal. Why would you do this if you are making a higher rate with your money than you are paying on your loan? It seems like you would want to borrow as much as possible (everything else being equal). On the other hand, as interest only, you are basically a renter. Why not purchase the home instead of renting the money? If you are borrowed up to your eyebrows, anything bad that happens means that this whole house of cards falls down, and you lose everything. -john- -- ================================================== ==================== John A. Weeks III 952-432-2708 Newave Communications http://www.johnweeks.com ================================================== ==================== |
"John A. Weeks III" wrote in message news:john-9BF335.10534320092005@ip- Why would you do this if you are making a higher rate with your money than you are paying on your loan? It seems like you would want to borrow as much as possible (everything else being equal). On the other hand, as interest only, you are basically a renter. Why not purchase the home instead of renting the money? If you are borrowed up to your eyebrows, anything bad that happens means that this whole house of cards falls down, and you lose everything. -john- Sorry, I meant on a "traditional" type of loan. |
"On the other hand, as interest only, you are basically a renter. "
That's not true. Even paying interest only, an owner benefits from the increase in a property's value over time. And for just about everywhere, it's been a pretty hefty increase in the last decade. If you bought a property and paid interest only, you'd still be looking pretty good. It all depends on what you do with the difference in cash flow that you get with an interest only loan. If you put it into investments that earn higher than the interest rate on the mortgage, with income tax effects factored in, then you come out ahead. |
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"Tell me all about it after 11 straight increases in the federal
interest rate, and no end in sight for interest increases. Folks who don't re-fi to a fixed loan right now risk having their payments go up so high that they can no longer afford the houses that they are in. " And that has exactly what to do with interest only loan vs a loan where you are paying down the principal? You're arguing fixed vx adjustable rate, which is an entirely different matter. |
In article .com,
wrote: "Tell me all about it after 11 straight increases in the federal interest rate, and no end in sight for interest increases. Folks who don't re-fi to a fixed loan right now risk having their payments go up so high that they can no longer afford the houses that they are in. " And that has exactly what to do with interest only loan vs a loan where you are paying down the principal? You're arguing fixed vx adjustable rate, which is an entirely different matter. Most interest-only loans that I have seen are adjustable rate loans. The rate of interest will keep going up over time since the fed is positioned to keep raising interest at every opportunity through 2005 and well into 2006. -john- -- ================================================== ==================== John A. Weeks III 952-432-2708 Newave Communications http://www.johnweeks.com ================================================== ==================== |
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