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Old 12-07-2007, 05:27 AM
 
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Regarding the 10 years no interest - its actually pretty common and not that weird. It shouldn't be a big deal if your friend (in 10 years) knows they can afford the new payment. We thought of doing it, because it would have freed up a little cash in the beginning for upgrades we wanted to do ourselves (instead of mortgaging to the builder) - but all along knew our "real" payment was the one forecasted for 10 years down the road. So that's what we budgeted on. Instead, we ended up going with another builder with a better (at the time) rate - 5.99%. It brought our payment down anyway, so we're paying principal/interest up front. Hopefully we'll have a little extra each month to put towards principal (our goal is two extra payments per year)... but with typical monthly unexpected emergencies we know we won't always be able to make that.

Good luck with your friend..
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Old 12-07-2007, 04:59 PM
 
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First question... the 10/1 i/o loan at 7.5 with no equity.... don't refi. 10/1 i/o loans are relatively stable as they are fixed for 10 years. Overall, they are excellent loans that give people low payments and the ability to pay principle when they want. Wait until she builds up a minimum of 10% equity (20% ideally) and then refi. In the mean time, if she can afford it... send extra money to build principle faster. and I agree with the post that it was her responsbility to understand the loan she was doing... not the lenders.... it was only the biggest purchase she ever made.

To the person with a FHA loan at 6.375% and little equity. Don't do anything. You have a good loan with good terms. You should be thinking refi any time soon.

PS - just because the Fed lowers the rate, doesn't mean mortgage rates are going down. The Fed deals with short term rates (think credit cards, equity lines, etc). It's is possible that when the Fed cuts their rate, the stock market goes up and the mortgage rates for fixed mortgage go up.
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