Before I tell the story, let me propose two loans and see which is better to see if this is actually a great deal (rates are sky high because property is not eligible for standard loan).....
Loan 1: 8.5% 30 year fixed $2076.07 P&I
Loan 2: 7.625% 30 Year 7/1 ARM (rate can fluctuate 2.625-12.625% after 7 years) $1911.04 P&I
Difference in monthly cost: $165.03
Cost to close is $4,246.52 more for loan 2
Is one of these inherently vastly superior to the other?
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As for the story...
I'm buying a property which is not eligible for a standard loan (it's a non-warrantable condo in a big city. I looked at a lot of places and pretty much none of the condos I would want would be eligible for a standard loan). I was all set to go with loan 1 but I was a little annoyed at the high APR because prior to looking at condos I thought I could get a standard loan and rate but after tons of research, that's just not true for anything I want. Not a big deal in the end, it is what it is.
Realtor calls me the other day and says great news, he found a new lender and the rate will go down almost a full point so I was happy enough with that but didn't think to ask questions (I am in Europe and it was like 1 AM when he called).
I started going through the stuff the new lender was sending me and realized I needed a new appraisal (annoying, but I'm saving so it seems okay). Then I got the disclosures and started to review it. The new loan is an ARM. It's fixed for 7 years but I've always avoided ARMs. I will be selling an investment property in the next 6-12 months (my lender/agent don't know I intend to do this since it's irrelevant) and I have enough equity to pay off this new mortgage, but I'm not sure I want to do that.
I'm sort of unsure if this "way better" loan is actually much better at all. Interest rates are high now and might go down but if the goal is to refinance in the future, doesn't it make sense to pay less upfront now since it costs money to refinance? The $165.03 I'm saving is offset by the $4246.52 I'm paying upfront and I wouldn't actually be ahead until month 26.
Thoughts?
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source https://www.reddit.com/r/RealEstate/comments/1aml0bw/my_agent_changed_lenders_without_my_permission/
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