Comments on: Should You Eat Your Prepay? http://blownmortgage.com/2007/12/08/should-you-eat-your-prepay/ #1 Free Home Loan Modification & Debt Relief Help For US Home Owners - Truths, Facts & News About the Mortgage Industry Sat, 07 Nov 2009 02:53:18 -0700 http://wordpress.org/?v=2.8.3 hourly 1 By: Unemployed AE http://blownmortgage.com/2007/12/08/should-you-eat-your-prepay/comment-page-1/#comment-7776 Unemployed AE Sun, 09 Dec 2007 22:11:09 +0000 http://blownmortgage.com/2007/12/08/should-you-eat-your-prepay/#comment-7776 This scenario actually sounds like a borrower who could benefit from keeping the neg am. Because Option ARMs recast every month, someone who can afford to make the fully amortized payment AND plans on staying in the property can save $$ over the long haul, even though the interest rate may be higher than a 30 yr fixed - IF they make additional principle payments. If the loan is held to maturity, TOTAL INTEREST PAID "could" be less than a fixed rate mortgage. Most neg-am borrowers don't fit this IF/AND scenario...probably less than 10% of 'em? This scenario actually sounds like a borrower who could benefit from keeping the neg am.

Because Option ARMs recast every month, someone who can afford to make the fully amortized payment AND plans on staying in the property can save $$ over the long haul, even though the interest rate may be higher than a 30 yr fixed – IF they make additional principle payments.

If the loan is held to maturity, TOTAL INTEREST PAID “could” be less than a fixed rate mortgage.

Most neg-am borrowers don’t fit this IF/AND scenario…probably less than 10% of ‘em?

]]> By: Tom Vanderwell http://blownmortgage.com/2007/12/08/should-you-eat-your-prepay/comment-page-1/#comment-7768 Tom Vanderwell Sun, 09 Dec 2007 04:25:47 +0000 http://blownmortgage.com/2007/12/08/should-you-eat-your-prepay/#comment-7768 Very thought provoking. We don't see a lot of prepayment penalties in my "neck of the wood" but the same principles can apply to many situations. I think it emphasizes once again the importance of working with a mortgage professional who can shoot straight, tell you like it is and really look at what is best for you as a client both short term and also long term. Sometimes the truth ain't easy, but it's important. I spent about an hour on the phone Thursday with a lady who is $30K underwater on her house and wants to keep the house, wants to make the payments because she owes the money, but needs her current mortgage lender to freeze her rate (back in the 8% range - it just went up to 12%) so she can do that. She knows it's going to be a long term thing, but she has the integrity to say, I need to do it, because I borrowed the money. The truth ain't easy, but it's important. Very thought provoking. We don’t see a lot of prepayment penalties in my “neck of the wood” but the same principles can apply to many situations. I think it emphasizes once again the importance of working with a mortgage professional who can shoot straight, tell you like it is and really look at what is best for you as a client both short term and also long term. Sometimes the truth ain’t easy, but it’s important.

I spent about an hour on the phone Thursday with a lady who is $30K underwater on her house and wants to keep the house, wants to make the payments because she owes the money, but needs her current mortgage lender to freeze her rate (back in the 8% range – it just went up to 12%) so she can do that. She knows it’s going to be a long term thing, but she has the integrity to say, I need to do it, because I borrowed the money. The truth ain’t easy, but it’s important.

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