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You can play with the numbers to figure out the turn point for the no PMI {Is it also no fee} loan. When I did it would be 5-6 years at a 0.5% differential.
If you are talking re-fi I would be scared of future inflation - look at mortgage rates for the last 40 years - that is about how far back you have to go to beat 5.25.
This is incorrect. In January of this year rates for a 30 yr fixed were 5.25%, so you only need to go back 9 months not 40 years. Also, in June of 2004 rates were even lower then 5.25, i locked several clients into 30 year fixed rates under 5%.
Please be careful when reading posters who do not know the facts.
I would suggest you take option 2. Even though option 1 is a lower rate, once you add in the pmi you are paying you actually have a higher rate. Plus if you make more then $105,000 the pmi is not tax deductible making option 2 even more appealing.
Last edited by VictorBurek; 10-10-2008 at 05:54 PM..
Reason: forgot to answer OP
[quote=VictorBurek;5639033]This is incorrect. In January of this year rates for a 30 yr fixed were 5.25%, so you only need to go back 9 months not 40 years. Also, in June of 2004 rates were even lower then 5.25, i locked several clients into 30 year fixed rates under 5%.
Please be careful when reading posters who do not know the facts.
quote]
5.25 is about as low as it has gotten in a long time and a very good rate; that was my point. There may be blibbits in time were the rates briefly dipped that low or even lower, but overall look at the trends............... no ...............I don't have a crystal ball - nobody does but if inflation kicks in, well rates will go up again, if deflation does - well not sure how much more rates go down but the value of the property will drop so who knows what then? I would take 5.25 and be happy.
This is incorrect. In January of this year rates for a 30 yr fixed were 5.25%, so you only need to go back 9 months not 40 years. Also, in June of 2004 rates were even lower then 5.25, i locked several clients into 30 year fixed rates under 5%.
Please be careful when reading posters who do not know the facts.
quote]
5.25 is about as low as it has gotten in a long time and a very good rate; that was my point. There may be blibbits in time were the rates briefly dipped that low or even lower, but overall look at the trends............... no ...............I don't have a crystal ball - nobody does but if inflation kicks in, well rates will go up again, if deflation does - well not sure how much more rates go down but the value of the property will drop so who knows what then? I would take 5.25 and be happy.
I agree, rates earlier this year where only that low for a few days, now 2004 was a different story, but i was just trying to correct an inaccurate statement. i dont have a crystal ball either but you said the value of property will drop, so are you sure you dont have a crystal ball?
Well, I said it would drop if deflation occurs.............If I had a cyrstal ball I would have cashed out my 403b last August ....... Who knows what is going to happen next, for all I know Bush will declare martial law, pick up the red phone and "Someone will set the spark off and we will all be blown away" [Merry Minuet, Kingston Trio]
But surely that is a really decent rate, no? When I did my math, if the plans are to stay longer than 5,6 years [or whatever works out for the loan]**, better to go for a slightly higher outlay up front and get a lower interest rate. ..... Now, the PMI may be a different thing - if house values actually drop, you may have a lot longer to go to be able to appraise at having 80% equity than if they were to increase and you may stuck with PMI for a long time. So it is a gamble on an unknown economy?
**Isn't THAT what the OP needs to do? Run the numbers for the different scenarios?
I would suggest you take option 2. Even though option 1 is a lower rate, once you add in the pmi you are paying you actually have a higher rate. Plus if you make more then $105,000 the pmi is not tax deductible making option 2 even more appealing.
I was not aware of this, so thank you very much. Upon research, it looks like the PMI tax deduction is good until 2010, and who knows after that. But, since I make close to that it wouldn't be worth my while, anyway, and loan option # 2, without the PMI, is looking to be the best to go with.
Also, the I/O option is now at 6.5%, so unless something crazy happens to lower that rate substantially, I will not consider the interest-only option.
Thank you all for the discussion. Looks like the tax savings on the 5.875, no PMI loan make it the front-runner.
I was not aware of this, so thank you very much. Upon research, it looks like the PMI tax deduction is good until 2010, and who knows after that. But, since I make close to that it wouldn't be worth my while, anyway, and loan option # 2, without the PMI, is looking to be the best to go with.
Also, the I/O option is now at 6.5%, so unless something crazy happens to lower that rate substantially, I will not consider the interest-only option.
Thank you all for the discussion. Looks like the tax savings on the 5.875, no PMI loan make it the front-runner.
I think you are making a good call.
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