Getting out of a mortgage?

[srt8]

I locked in back last may at 5.59%, now i see banks offering 3.89 and lower locked in for 5 yrs. Any idea what kinda penalty I'm looking at or how they figure that out? I have 3.5yrs left on this current mortgage.

[physique]

why the hell are u guys locking mortgages in? variable open! you will pay prime plus 0%. prime is 2.25%

no way is prime going to jump 3.5% in the next few years. hell next june its suppose to go up and i would bet it goers no higher then 2.50%

not sure if there is a penalty. i was reading about mortagages on my banks site today, and it said i can re-negotiate my mortage as many times as i want a year, i just have to qualify for them. best to talk to your bank

[Talo]

I did the same thing 5.2% . The bank told me the penalty would be around $14,000 and that was with3 years to go.

Why lock it in? Because you never know what the he'll they are going to do and a few years back 5% was good. IMO it still is.

[gregdoucette]

go with closed variable, U might get prime minus .25 with that, open variable is goint to be higher. Most importantly is get variable not fixed. Studies show variable morgages on avg save thousands compared to fixed due to lower interest rates. I got my brother to even pay the penalty for ending his morgage agreement early and saved 3000$ in a year from a much lower interest from closed variable. I got lucky and got prime- .75 a few years ago in closed variable. and my other house was prime -.6 abotu a year ago on the other house. Too bad I live in an appartment thought and pay rent.

[physique]

go with closed variable, U might get prime minus .25 with that, open variable is goint to be higher. Most importantly is get variable not fixed. Studies show variable morgages on avg save thousands compared to fixed due to lower interest rates. I got my brother to even pay the penalty for ending his morgage agreement early and saved 3000$ in a year from a much lower interest from closed variable. I got lucky and got prime- .75 a few years ago in closed variable. and my other house was prime -.6 abotu a year ago on the other house. Too bad I live in an appartment thought and pay rent.

variable closed right now is prime plus .7% so basically 2.95% which is awesome!

the reason why i did open was the prime rate was close to .5%. right now my mortgage is 1.65%. I will wait a tad longer before i lock it into a variable closed.
but in the end i agree with u, variable closed is alot better then any fixed mortage. only way i would do fixed is if interest rates jumped to 8% or something ridiculous.

[srt8]

Reason i didn't do variable was i was just barely approving for a 450k mortgage, going variable they told me i wouldn't approve. I'll call the bank tomorrow and see, i know the diff between locking in at the current vs what im paying right now is gonna be around 35 grand. Even if the penalty is retarded and like 20k im still saving a shitload.

[Slevin]

I just ran into this same issue.

I locked in at 6.03%, and sold the house about 2 months ago when mortgage rates were bottomed out. The mortgage was about $275,000, and my pay-out was $16,500 to walk away from it. There was about 34 months remaining in the term.

Rape.

[daande]

Cant you goto another bank and re-mortgage at a lower rate and get them to pay off your current mortgage?

[CanadianIron]

You have stuff written up in your morgage stopping you from paying it out like that.

Mine for example will only let me pay 25% a year of the total down, so it would take 4 years to pay it off, otherwise you have to pay a huge penalty.

A bank earns pretty much double the value of the morgage over the 25-30 years of it, they arent going to just let it go.

[Vitamin S]

from what i heard, u can re-finance or re-mortage ur home any time, but if doing so within your mortage term ie 5 years you get penalized i think its like 10 percent of the remaining balance. don't quote me but some figure like that. so they would just probably slap that 10 percent figure onto the new mortage that you will undertake.

ie. so if your balance is 50, 000 on mortage, 10 percent would be 5 grand. so you would then re-mortage it at a lower rate for 55 grand.

[CanadianIron]

Frick, im gonna call my wife and tell her to call our morgage broker... we should look into this.. my morgage is like 325G's and I think our rate is like 5.3%... we could save a shitload.

[Bowlcut]

why the hell are u guys locking mortgages in? variable open! you will pay prime plus 0%. prime is 2.25%

no way is prime going to jump 3.5% in the next few years. hell next june its suppose to go up and i would bet it goers no higher then 2.50%

not sure if there is a penalty. i was reading about mortagages on my banks site today, and it said i can re-negotiate my mortage as many times as i want a year, i just have to qualify for them. best to talk to your bank

http://research.stlouisfed.org/fred2/graph/?s[1][id]=MORTG

http://research.stlouisfed.org/fred2/graph/?s[1][id]=DGS10

I wanted to see if it would load my graphs I edited and it didn't include the changes but long story short is this:
The bull market in bonds is over and yields have no where to go but up. Depending on what happens in the next few years there will be rate increases. I can't say when, but I am not going to be surprised when rates go up to 15%. It will happen because no banker is going to lend money on a mortgage at 2.5% when they should buy risk free sovereign debt that yields more than that.

[physique]

http://research.stlouisfed.org/fred2/graph/?s[1][id]=MORTG

http://research.stlouisfed.org/fred2/graph/?s[1][id]=DGS10

I wanted to see if it would load my graphs I edited and it didn't include the changes but long story short is this:
The bull market in bonds is over and yields have no where to go but up. Depending on what happens in the next few years there will be rate increases. I can't say when, but I am not going to be surprised when rates go up to 15%. It will happen because no banker is going to lend money on a mortgage at 2.5% when they should buy risk free sovereign debt that yields more than that.

15% wont happen at least not in the next 10 years and thats how long it will take me to pay my house off. so i will take that bet.

besides it wont go from where it is now to 15% overnight. it would increase in small amounts. if banks raised to 15% tomorrow, 80% of the properties out there would be forclosed on. how does that help the bank?

If you do a variable open or closed term, nothing stops u from locking in to a fixed WITHOUT A PENALTY!

hell when i was young i still recal mortgage rates were 28% and your money in the bank got u 8%. and i recall how many people had trouble making that payment each month. including my parents and thats when times where good. where the economy stands now, u think they couldf raise to 15% or higher and not have the entire economy cave in?

[Bowlcut]

15% wont happen at least not in the next 10 years and thats how long it will take me to pay my house off. so i will take that bet.

besides it wont go from where it is now to 15% overnight. it would increase in small amounts. if banks raised to 15% tomorrow, 80% of the properties out there would be forclosed on. how does that help the bank?

If you do a variable open or closed term, nothing stops u from locking in to a fixed WITHOUT A PENALTY!

hell when i was young i still recal mortgage rates were 28% and your money in the bank got u 8%. and i recall how many people had trouble making that payment each month. including my parents and thats when times where good. where the economy stands now, u think they couldf raise to 15% or higher and not have the entire economy cave in?

That's the dilemma the Fed Reserve and most central banks find themselves. The effects of their massive money printing are not evident.
http://research.stlouisfed.org/fred2/series/WRESBAL
That graph shows how much money the banks have parked at the Fed overnight. Notice the blip? There will come a point where the banks will be forced to lend out that money either because the Fed will charge them a negative interest rate, or because they are tired of losing money (the excess reserves get 1/10 of 1% interest, but bank customers are paid ~1-2%.

Here is a could graph of what that $1trillion in excess reserves will turn into
http://en.wikipedia.org/wiki/File:Fractional_reserve_lending_varyingrates_100ba se.jpg

This is what could go down
1) The inflation of the monetary supply transfers into prices because banks begin to lend or US dollar declines
2) Bernanke has to decide does he raise rates to contain price inflation or risk massive inflation
3) Helicopter Ben decides because his retirement is in US dollars he will do what Paul Volcker did and raise rates but a depression follows.

My advice would be for anyone with a variable rate to be prepared to fix it on longer time horizon. It depends on one's cash flow, but if a person could prepay the mortgage in under 5 years then fixing it for 5 years would suffice, but on a mortgage with a 200k balance most banks will only let a person prepay $40k a year. I dunno about you guys but most of us don't have an extra $40k in cash to prepay.

[steve_d]

even if you lock in at a rate of say 4% fixed, go variable. Even if for some reason it rises to 5% over the next few years, you may be losing down the road, but in the meantime you will be saving - so at worst you will balance out if the market turns to crap.

My first house I took variable at the worst time possible, and I still came out ahead. As for open vs. closed...shop around, the bank I am at right now has the same rate open as closed, so it was a no brainer. Another key thing to look out for with closed variable is what happens when you move...can your port the mortgage without penalty?

PS: when greg said he got his brother to get out of his fixed mortgage, that was the other brother - I sure wouldn't have gotten into that situation