Ask MetaFilter questions tagged with mortgages

Dark clouds on the rates horizon.

Gordion Knott — Tue, 15 Dec 2009 11:06:40 -0800

The NY Times predicts a dramatic increase in mortgage rates come March, with rates climbing to 6 percent or higher. Ouch. Arguments for or against? In an article on December 13, the NY Times suggested that American interest rates would spike dramatically due to the expiration of a Federal program.

To save you the hassles of clicking, here's the meat:

"Rates went above 5 percent in 1952 and stayed there — until this year.
"The super-low rates are not likely to last much longer. The Federal Reserve program that has driven rates to such lows, which involves buying $1.25 trillion in mortgage-backed securities, is scheduled to expire in March, and Fed leaders have said that it would not be renewed.
"Some analysts believe rates could jump as high as 6 percent in the spring. On a $300,000 mortgage, such a jump would cost an extra $225 a month."

Now, NY Times articles (especially of late) tend to the sensational, and I'm aware that this prediction is likely skewed. There's much more to the picture than what is printed here. But even so, it could be a costly proposition for people with adjusting mortgages, or those who are planning a refinance or new mortgage in the second half of 2010.

What I'd like to know is, to what extent is this prediction of rate increases common to the media at large, and not just the Times? Is this widely perceived to be an accurate assessment? Are there any arguments against a definitive rate hike after the expiration of the Fed plan?

Advice on refinancing to an interest-only home loan in Australia? (with some complications)

Anonymous — Sun, 13 Sep 2009 08:56:37 -0800

Advice on refinancing to an interest-only home loan in Australia? (with some complications) I currently own a house which is now mortgaged to the tune of $350k. Because I was working as a freelance fund manager with a less-than-reliable income when I first bought the house, the banks would not lend me anything. So I borrowed from a relative. Everything was fine until the credit crunch wiped out my (and my clients') portfolios. Since then I have only been able to pay my relative back the interest on that loan.

But now, for his own reasons, my relative needs to have that principal back. I'd like very much to oblige him, and am wondering if this is possible without selling the house, into which I have sunk a lot of time and money in renovations.

The complication is that one of my ex-clients is now taking steps to possibly sue me, essentially for losing her money. I have breached no contract and did what I could with the market the way it was, but my barrister tells me that the legal process will be a long and tedious one, and that things are still very much in the air. My feeling is that these sorts of cases will not result in clear-cut settlements, and that even in the best of cases I will be up for some hefty legal fees.

The good news is that I now have a stable, well paying job with a large international company. I have clean credit history and the kids are financially independent at least on paper, so I'm confident the banks will be happier with me now.

What would be ideal is if I could take out a 15 year interest-only loan, pay back my relative now, and essentially go on as I have now until I'm recovered. But if my ex-client does serve me papers, will that make it impossible again to apply for a loan? Of course, I will not apply for a loan if it looks like I would not be able to pay it off after the 15 years, but even if things turn sour and I am obliged to pay compensation, I think that by that time the case is concluded I will be back on my feet and able to cover both.

What are my options as far as refinancing goes? Do you have any recommendations for specific brokerage houses, or any other advice on my situation?

Thank you in advance. Just in case, I can be reached at: thanksaskmefi@gmail.com

What are the effects of high inflation and high interest rates on an economy?

thewalrus — Sat, 04 Apr 2009 01:12:56 -0800

Economicsfilter: How do mortgages work in developing countries with high rates of inflation and high interest rates? For example, Pakistan has a 20% inflation rate and the average fixed term prime residential mortgage for people with good credit is priced at 17%. What are the effects of this on a market? Can anyone point me to economics texts or real world examples of the results of the following:

USD:PKR exchange has gone from 1:60 to 1:81 in less than one year.
Inflation rate steady at 18 to 22% per year.
Minimum mortgage costs for residential consumers in the range of 16.5%+

The Pakistan central bank sets a rate which results in a KIBOR (Karachi Interbank Offered Rate) of approximately 15%. The various big name banks in Pakistan mark this up a couple of percent and sell residential mortgages on 10, 15 or 20 year amortization terms for around 16.5 to 18.0%. These are not "sub prime" type rates but are for people who can put 20-25% down, with good credit scores and job references, the Pakistani equivalent of a non-jumbo Prime mortgage.

This obviously makes the purchase of an average 3-bedroom flat quite a bit more expensive than in the US or Canada, where mortgages for anything would be under 8%.

How did this work in Argentina when the currency dropped drastically against the US dollar? I know of people who got into the Argentine market at exactly the right time with a USD exchange (or Euros, or GBP, or whatever) and were able to buy up property at amazing prices. Were interest rates similarly high in Argentina during the same period?

Does a high inflation rate somewhat offset the effect of having a mortgage with a 17% fixed interest rate? If the mortgage contract is fixed at a certain payment, but the inflation continues, a theoretical Rs125,000 monthly payment will continue to get less expensive as time goes on...

A perhaps naive question about securities.

boo_radley — Wed, 25 Mar 2009 14:09:42 -0800

Thanks to NPR, I understand that securitized mortgages are bundled together and divided into traunches, and that this is bundling and dividing process is what makes these securities so difficult to deal with. Is there no way to "reassemble" the traunches and de-securitize the mortgages? It seems like that would make valuation easier to determine, and help with isolating bad mortgages/ investments.

Can I be held accountable?

Anonymous — Tue, 27 Jan 2009 14:39:56 -0800

Friend wants me to lie to mortgage company on his behalf. Legal ramifications for me or my company if I were to? Friend and I started a business. He mismanaged and was forced out by the investors. Turns out he was in the middle of mortgaging his house, and now he wants me to lie to the mortgage company and say he is still employed with my company.

What are the legal ramifications of this were I to lie for him? I'm not planning on doing it anyway, but I want to have a more concrete reason than "because it's wrong" since I've tried that and he doesn't seem to grok that. Yes, I know that should be enough, and there's enough there for a separate askmefi post.

This is in NY if that matters.

How does this calculator work?

missmobtown — Fri, 16 Jan 2009 12:28:02 -0800

How do mortgage calculations work? As an always-have-been-and-always-will-be renter, I've been free to ignore mortgages and how they're calculated. But now, for work, I need to understand how they're calculated. Specifically, I need to understand how the mortgage calculator on this page works:

https://www.uamc.com/locator/Calculators (select "What Will My Monthly Payments Be?" on the left panel)

Can this be distilled down to a mathematical equation that a programmer on my team would understand?

This is in California, if it makes a difference.

The closing is off, now what?

mygothlaundry — Thu, 25 Sep 2008 12:49:42 -0800

Help. My house closing, scheduled for tomorrow, has been indefinitely postponed since the seller's second mortgage is not going to be paid in full. I don't know what to do even though yes, I already talked to a lawyer. I have had a contract to buy this house since the end of July. I am buying the house for cash due to a recent unexpected inheritance when my mother suddenly died a month ago. The original contract was based on my ability to secure financing and it is for about 8 grand less than the original asking price for the house.

The seller, who is going into bankruptcy, has apparently got two mortgages on the house. The contracted price is not enough to pay off both her mortgages and she has not yet gotten a letter from the second mortgage company agreeing to the short sale. I found out about all this three hours ago and I just got off the phone with my cousin, who is a local real estate lawyer.

I have to be out of my rental house by next Saturday, October 4. I am also in the process of cleaning out my mother's house and moving my 80 year old aunt with vascular dementia into my new house. The moving trucks are coming on Tuesday to both houses. The electricity and water have been turned on at the new house. Everything is packed. A friend of mine, a contractor from Baltimore, is even now driving down here because the original plan was to take the next five days to do some necessary - mostly aesthetic, but still - repairs to the house before I moved in. We were going to start with ripping up the horrible carpet and sanding the wood floors underneath before the furniture got moved in.

The real estate agent has gotten the seller to agree to something called a Possession Before Closing contract which means that I could proceed to move my stuff into the house but a) it's only good for seven days, although it can then be extended week by week if necessary and b) it stipulates that I cannot make any changes at all to the house while I'm living there. As in any: apparently, anything I do could be considered damage to her property. This contract is specific about even my animals (2 dogs and a cat) being in the house.

My cousin the lawyer says this is going on all over the country and mortgage companies are inundated and the the only option I have would be to try to get my landlord to extend my lease another month and stay here. That might be possible but unfortunately my aunt's situation is not as easily fixed, since she cannot stay where she is: my mother's house must be vacated by Tuesday, October 1. I don't have room for my aunt in this house and the general situation of boxes and chaos wouldn't be good for her at all anyway.

He also says not to make any changes to the house at all. That is going to make everything insanely more difficult, since it means construction going on while we're living there and that will be difficult for my aunt. If I can even get my contracting friend who I trust to stick around to do this work for me, and since I promised him work, I feel bound to pay him at least something for all his trouble already. Also, yes, this would be wrong, but, what if I do rip up the carpet and then the sale falls through? If she sues me for damage to her property (actually, it's a total improvement, good god) then can I counter sue her for breach of contract?

So what do I do? Do I move into the house knowing that it could all fall through and I'll have to move out again with little or no notice? Is it likely that the mortgage company is going to agree to this short sale and release the lien on the house? It will go into foreclosure if they don't, so you'd think it would be in their best interest to do that but will they? Do I move all my stuff into storage and put my aunt into a hotel and farm my son out to his sister and stay at a friends? Do I try to get my landlord to extend my lease another month? Should I give up on this house and start looking for another one? I'm freaking out and I don't know what to do. Has anybody been in this situation before?

Can you have two mortgages on the same apartment?

mjao — Sat, 20 Sep 2008 20:14:20 -0800

Can I go halves in an apartment with my brother? i.e., can we each have separate loans for the same apartment? No one I've asked seems to know. We are in Queensland, Australia. He would be paying his share off a lot more quickly than I would be able to pay my share. The plan then is that he would continue living in the apartment with me (or rent out his room) and buy a second house elsewhere.

I know this probably seems like a really simple question, but I know absolutely nothing about home loans :)

How to overcome weird snags when I'm buying a house?

Anonymous — Sat, 12 Jul 2008 20:14:00 -0800

Please help me with a weird house-buying situation caused by the mortgage crunch. My wife and I are first-time house buyers. We finally found a house we love, and we want to buy it. Apart from some old medical bills, we're in a "not bad credit, just no credit" situation, because we have a good income, and we don't have any credit cards but buy everything with cash. When we applied for a mortgage, we were rejected because the mortgage industry won't lend money to anyone who doesn't have really good credit right now.

The house was advertised several months ago (that's how long it took us to get the mortgage application together and get turned down) as having a rent-to-buy option, so our next thought was to move in, clean up our credit, rent to own, and try again for a mortgage in a year or so.

The de facto owner of the house is an immigrant man who thought he could make a living flipping houses in the US. He bought the house with the help of a friend (whose name is on the existing mortgage) and has sunk several tens of thousands of dollars into the house. Then the mortgage crunch hit. Now he's getting cold feet but is at the same time obviously desperate and doesn't know what to do. As far as I can make out, he's paying the $2300 monthly house payments with his credit card and sinking deeper into debt every month.

Now instead of the $1500 rent-to-own payment cited in the ad for this property, he's asked us for $2000 a month and $10,000 down. (The property is worth about $250,000.) The $10,000 is meant to cover the payments he's missed or had to pay with credit card. The $2000 or more per month is meant to cover his mortgage payments -- or not quite. He says he's not sure a rent-to-own situation is even feasible for him anymore.

I told him we could cover the mortgage payments he's put on his credit card and we could completely cover the $2300 monthly payments from now on if he would sign his mortgage over to us. He said he would let us move in if we did that, but he wanted to keep his name on the mortgage. This is when he told me how much money he had already sunk into the house, and how much he stood to lose by just signing over the mortgage. I certainly can't blame him.

I pointed out that he would continue to lose money anyway if he didn't do something, because we're the only people to have shown any interest in the house in many months. (There's the mortgage crunch and also the fact that the house is unassuming, even ugly, on the outside, but beautiful on the inside, with special features such as a second detached building that would be especially useful to us in our professions -- but I'm trying to keep this anonymous, so I'll leave it there.)

So here we are on opposite sides of a chasm caused by the mortgagequake of 2008. We can see his position and he can see ours. We want to buy the house and he wants to unload it. But how?

Thoughts I've had: Our credit rating has improved a little in the past few weeks because we've been working on it while we're going back and forth with the owner. Should we apply again for a smaller loan, just enough to buy the owner out of his mortgage, paying off the house payments he missed and what he's sunk into the house? Or should we try to convince him that the money is truly sunk, and the best thing he can do is to get the hell out? After all, he's trashing his credit (or his friend's) if he defaults on the mortgage.

I'm really lost here and don't know what my options are. I will say that we have been working with a sympathetic mortgage broker and a real estate agent, ditto. The latter says she can't help much with rent to own, except that she can look over the rental contract to make sure it's sound. Still, they know us and we can marshal their help if necessary. My wife also stands to inherit (IIRC) some tens of thousands of dollars some months in the future (she must wait for a family property to be sold). Apart from that, we have some $15,000 in savings, some of which must be used for moving expenses. We also have good brains and the power of Ask Metafilter, so... Go Team Metafilter!

p.s. If your answer is "Ditch this clown and buy another house!", please don't. This is the only house we've seen that we've both loved, and it would break my wife's heart not to be able to buy it.

I just want somewhere to live, honestly.

Jimbob — Mon, 03 Mar 2008 23:15:26 -0800

Am I about to get screwed over in regards to the house I'm buying, that's currently being renovated? The story:
Moving to a new city (Hobart, Australia) for a job in about 7 weeks.
We went there in January to look at houses, found one that was far superior to others, but that was currently having some minor renovations done; new carpets, some rendering on the external walls. We made an offer subject to finance being approved.
Applied for a loan through a mortgage broker. Mortgage broker was incompetent, loan was denied.
Applied for a loan through someone else, loan got conditional approval.
Mortgage lenders sent a valuer to the house, discovered that the renovations to be complete were not clearly stated in the contract, and they couldn't loan me the amount I was asking for the property.
My solicitor gets an extension to the date for finance approval, obtains an undertaking that the renovations will be complete.
Today arrives. The day finance is supposed to be approved by. Mortgage lender rings me and tells me the finance now won't be approved until the renovations have actually been completed to a satisfactory standard, "for my protection".
So, we're now past the close of business on the day that finance was supposed to be approved by, and my vendors are going to be told that they have to have the renovations complete before my loan is approved. Except they haven't been told that yet, because everyone seems to be missing everyone else's phone calls.

Question: Am I about to be fucked over? It seems the risks in this situation lie completely with me. The vendors could pull out of the deal tomorrow. Or, the vendors could do the renovations, the bank could say they're not good enough and I don't get the house, but the vendors just go on and try to sell it to someone else.

I know this is probably a bit of a hazy question, with too many personal factors involved, but has anyone else had experience in situations like this? Are vendors likely to pull out of a deal because we keep asking for finance extensions? Or does the fact that we've been going about this for so long mean they're likely to stick with it? Is the bank leading me on? Does this sort of thing, demanding renovations are complete before approving the loan, happen often?

Pay Option ARMS in SF Bay Area?

mikeand1 — Mon, 24 Dec 2007 16:38:47 -0800

How can I found out how many homes in the San Francisco Bay Area (East Bay in particular) were financed with Pay Option ARM mortgages? I've seen recent reports that a large number of Pay Option ARM mortgages are due to recast in the next few years, which will likely result in a substantial amount of defaults and further lowering of home prices.

I've also heard that these mortgages were fairly commonly used to finance home purchases in affluent areas, as compared with so-called sub prime mortgages (which tend to be concentrated in low-income areas).

I'm currently in the market for a home in the East side of the SF Bay Area -- Berkeley, Kensington, El Cerrito, and the nicer parts of Oakland, like Rockridge, etc. I'd like to know how the recasting of these mortgages over the next couple years is going to impact this market, which so far has not been as hard hit by the sub prime defaults as other areas.

Can anyone tell me how I can find out how many homes purchased in the East SF Bay Area the past few years were financed with Pay Option ARMs, and when these loans originated?

Thanks,
Mike

subprime definition

otio — Wed, 12 Dec 2007 06:29:51 -0800

Dear bankers and other financial experts: What is the basic definition of a subprime loan? I've seen "at least 2 points above prime," "at least 3 points above prime," "between 2 and 5 points above prime." Is there a single definition or does each bank define subprime differently? Related question: Is there a standard dictionary or encyclopedia of financial terms that you can recommend for these sorts of questions? Thank you.

Tips for getting a mortgage with bad credit

dial-tone — Mon, 09 Apr 2007 09:32:08 -0800

The path to a house when you have bad credit... My wife and I are interested in purchasing a house within the next few years. She has a decent paying job, while mine isn't amazing, with a combined income of just under 60k. The trouble is that in the past I declared bankruptcy due to financial mistakes I made when I was in college (approx 5-years ago). To try to recover, I have taken out a few credit cards, and am in the process of paying them off.

With the credit cards, I haven't made a single late payment and always more than the minimal payment. I also pay my student loans and other debts on time. Our combined Credit Debt is equal to approx 12% of our yearly income. We also have more than 40k in students loans between the two of us, but I'm under the impression that student loans don't count horribly against you when going for a house.

My wife has better credit, though she may have made a reported misstep or two in college (five years for her as well). According to her last credit report, she only has one mark against her.

We're looking to buy a home eventually, with a long-term mortgage (15-30 years). To accomplish this, first we're paying off the credit cards, and then trying to save up the 10%-20% downpayment. We've found houses we'd love for 60k-100k.

We want to be in the best position possible when we start looking for a loan.

1) Should we cancel the credit cards as we pay them off which will apparently hurt our credit score in the short term, leaving only one with the highest available funds, or should we pay them all off and leave them open?

2) What other steps can we take to assure banks that we're the type of people they should lend money to?

3) How will we know when it would be worth trying for a mortgage (how much money saved up/bills paid off/etc.)?

Pick your brains- turn the mortgage industry on its head!

Izzmeister — Fri, 04 Aug 2006 12:16:24 -0800

Building a mortgage company from the ground up- turn it on its head! I am in the process of launching a new mortgage brokerage.

I'm looking for some out of the box ideas that can be used to turn the business on its head- doing things totally differently to generate business and word of mouth...

any ideas?

Some thoughts:

* allowing every single customer to rate the company, bank, loan product with feedback (like ebay style)

* "process your own loan" - do it yourself, be your own broker, pick any program and sign up as a rep for our company and turn each customer into a broker for the company- (people love to see ratesheets and understand exactly what is being done and how much the broker is making)

* "see how much we will make on your loan"

* give a small (stock) ownership percentage of the company to people based on amount of referrals and amount of loans/money closed.

what have you wished would be done differently by brokers? where is the business broken? what other ideas or comments on the above do you have?

and yes, before any of them is implemented, the legality will have to be checked. i know that....

looking for some real good ideas!

Finding a mortgage broker

jca — Mon, 20 Dec 2004 11:35:34 -0800

Finding a mortgage broker? I need to find a mortgage broker for a first time home buyer relocating to Atlanta GA. There seems to be a lot of "noise" on this subject as far as searching the web for information is concerned.

Can anyone offer any advice/recommendations on finding a broker?

Tell me everything about buying a house

pieoverdone — Mon, 10 May 2004 12:43:08 -0800

I want to buy a house. I have no idea where to start.

Mortgage advice/opinion relevant to the UK?

squealy — Fri, 23 Apr 2004 06:17:30 -0800

Mortgage advice/opinion relevant to the UK? (More inside) I'm in the UK and the fixed rate period of my mortgage is due to run out in June. Now, I know little of economics and even less of financial planning, but it's fairly clear even from my limited knowledge that the 5.99% variable rate I'm due to move on to is not the best deal available. The mortgage is only for £40,000 and the house is now worth about £70,000, so there's no problem with equity. I don't intend to move house within the next five years. Anyone have any knowledge/opinions on what's the "best" type of mortgage or even a specific policy? I've seen a couple of financial advisers but they both had wildly differing advice. I'd be interested in a MeFi take on the issue as I'm a bit of a numpty when it comes to financial matters.