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question for homeowners(9 posts)

question for homeownersgtx
Oct 29, 2003 2:05 PM
Are you worried that you'll be "trapped" in your current house once the interest rates go back up? (this assumes you've recently done a refi to a great rate) Anyone thinking of trying to move soon--to make either a lateral move or move up a tad before rates go back up?
No way..........MR_GRUMPY
Oct 29, 2003 2:30 PM
I've been in my house for 23 years now. Just refi'ed a year ago, so I plan to be burried in the back yard. I've got no reason to move from this non-forest-fire, non-hurricane, non-earthquake area. All I've got to worry about are these frickin' cold winters.
Why we need portable mortgages-filtersweep
Oct 30, 2003 6:48 AM
-like in Europe. If you borrow $300,000 for a home, why is that loan only attached to that particular property? It almost doesn't make any sense...
It's called collateral.........Len J
Oct 30, 2003 7:08 AM
all mortgage loans are secured by the value of the property lent on.

In addition, there are two other factors that require new loans on new properties in the US.

1.) Requalification. In the US, you only are reviewed to see if you qualify at the time of the original loan. Even if you are currently in a situitation where you wouldn't qualify for the loan, as long as you are somehow making payments, they can't reduce their risk and call the loan. Requiring non-portable mortgages ensures that borrowers are requalified.

2.) Fee generation. Lenders make tremendous amounts of money on loan origination fees as well as the selling of loans.

If there is a way to make this financially attractive, lenders will do it. Right now it isn't, Lenders see it as increasing risk & lowering fees. If it were available, expect it to be more expensive.

Len
No kidding-filtersweep
Oct 30, 2003 8:14 AM
-and when you "trade up" you still have collateral in the new property. The thing is, the lenders would still retain their closing costs, because they really aren't going anywhere.

If you look at it this way, when you take on a 15 or 30 yr mortgage, they are presuming you more or less remain qualified for the duration of the loan anyway.

Bottom line- aside from recent ridiculously low rates, the entire mortgage industry is a bit of a non-consumer friendly racket- IMHO... there is no way that the $3000-4000 closing costs even need to approach that amount of money on an initial loan. There are probably three people who spend about an hour each on a computer to "close"- and it STILL costs that much? A title search occurs every time the property has changed hands in the past... it is crazy. End of rant.

Generally portable mortgages don't have quite the same interest rate as a standard fixed does, so they do make some money back that way.
I agree........Len J
Oct 30, 2003 8:21 AM
I wasn't defending the industry, just explaining why portable mortgages don't exist.

"and when you "trade up" you still have collateral in the new property. The thing is, the lenders would still retain their closing costs, because they really aren't going anywhere"

This assumes that you trade up, not everyone does.
They might retain their fees, but they wouldn't make another set of fees on the new house.

"Bottom line- aside from recent ridiculously low rates, the entire mortgage industry is a bit of a non-consumer friendly racket- IMHO... there is no way that the $3000-4000 closing costs even need to approach that amount of money on an initial loan. There are probably three people who spend about an hour each on a computer to "close"- and it STILL costs that much? A title search occurs every time the property has changed hands in the past... it is crazy. End of rant."

You are assuming that the fees have anything to do with what it costs them. It doesn't, it has to do with industry norms & what the market will bear. You don't like the fees, don't pay them, but don't complain if you can't get a loan. The fees are nothing more than an increase in the overall cost (interest) on the loan. Nothing in life is free.

I agree with you that the fees are rediculuous but the industry remains as profitible as it is because of fees. That won't change until someone changes the industry.

Len
non-issuemohair_chair
Oct 30, 2003 7:14 AM
I don't know anyone who worries about this. I'm not sure what you mean by "trapped," either. Do you think no one is going to buy your house if rates go up and you'll be stuck with it? If so, that's ridiculous. Houses were selling well when rates were much higher than they are now, and they always have. If by "trapped" you mean that you won't want to move because you don't want to pay higher rates, well, that's your own doing. That's like the people who live in rent control apartments. I suggest you buy the house you want to live in your entire life right now and not worry about it.

Most people don't move on a whim--they have reasons, and sometimes those reasons come with a cost. You have triplets, you need a bigger house. You get transferred, you need another house, maybe in a higher cost area. Still, the biggest factor in moving for most people is the price of the house, not interest rates. Interest rates are usually far down the list of factors, because for most people, they have to get a loan. There being no choice, they can only hope they do well with the rate.
that is what I meantgtx
Oct 30, 2003 10:12 AM
I lived in San Francisco for eight years in a rent controlled apartment. After just a few years it would have cost us hundreds of dollars more to rent an identical apartment across the street. When I moved out the landlord (slumlord) trippled the rent. We couldn't afford to rent or buy so we had to leave SF (most of the people we knew left SF for the same reason within a 2-3 year period). Now I have a house that is nice but may end up being a tad small for a growing family. But if the rates go back up it will be hard to justfy moving to get that extra bedroom--won't be just the extra $20-$50k or whatever for the slightly bigger house, we would take the extra hit from the added interest. So instead of a difference of maybe $200-$300 a month, it could be an extra $600+ a month. At that point I guess you look into remodeling instead of moving, or cashing in and moving (again) to somewhere less expensive...
you're forgetting...mohair_chair
Oct 30, 2003 10:25 AM
Interest is tax deductible, so you need to think about how it will affect your taxes to come up with the true cost. That extra $600 a month may effectively reduce to $300-400 a month or less.