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Re: ARMs aka won't people ever learn? [windywave] [ In reply to ]
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windywave wrote:
veganerd wrote:
windywave wrote:
veganerd wrote:
spudone wrote:
windywave wrote:
http://www.cbsnews.com/news/adjustable-rate-mortgages-make-a-comeback/

Adjustable rate mortgages are coming back in vogue. Why? Rates are near all-time lows. The risk profile is asymmetric. I just don't get this unless we're back into needing people who can't afford houses buying them.

I could see it being advantageous if you plan to flip the house quickly.



Exactly. Also great if youre trying to pay down debts.

If you have that much debt you shouldn't be buying a house.

How much? Youre making a simplistic assumption.

So much debt you have to use an exotic security to meet your cash flow.

Youre assuming need rather than desire. Lowering your mortgage can free up more cash to pay off higher interest lines of credit faster even if your current dti is acceptable.

who's smarter than you're? i'm!
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Re: ARMs aka won't people ever learn? [veganerd] [ In reply to ]
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Youre assuming need rather than desire. Lowering your mortgage can free up more cash to pay off higher interest lines of credit faster even if your current dti is acceptable. //

Exactly. The loans they were describing in the article were the old anyone with a pulse can qualify for, not what is going on now. And I didn't get one for any other reason than to save money. I put 30% down on the house to keep the payment low and all that extra money I will put to use making more money. One way of course is to pay off higher interest cards or loans, but at the moment I have everything paid off, so I put it to work in the markets..
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Re: ARMs aka won't people ever learn? [windywave] [ In reply to ]
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No one is saying (at least I'm not) that they are inherently bad, just that they are not appropriate for most if not all people at present. You're missing the point of the asymmetric risk associated at this point in time. What you are missing also is that ARMs are based off LIBOR plus the tick. In a down market such as '08 LIBOR/money market froze up and you had a disconnect between it and treasuries. Like I said before I just think putting on this risk here has limited short term upside and significant long term downside.

Agree. They can work for some. What scares me about ARMs is being sold to people who don't really understand them and just hear the stories of how they work. With rates as low as they are the only reason I could see for there being an uptick is a hot real estate market and people using them to flip houses. Which unfortunately will lead to success stories and people who don't or shouldn't using them financing that way.

"I think I've cracked the code. double letters are cheaters except for perfect squares (a, d, i, p and y). So Leddy isn't a cheater... "
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Re: ARMs aka won't people ever learn? [veganerd] [ In reply to ]
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veganerd wrote:
windywave wrote:
veganerd wrote:
windywave wrote:
veganerd wrote:
spudone wrote:
windywave wrote:
http://www.cbsnews.com/news/adjustable-rate-mortgages-make-a-comeback/

Adjustable rate mortgages are coming back in vogue. Why? Rates are near all-time lows. The risk profile is asymmetric. I just don't get this unless we're back into needing people who can't afford houses buying them.

I could see it being advantageous if you plan to flip the house quickly.



Exactly. Also great if youre trying to pay down debts.

If you have that much debt you shouldn't be buying a house.

How much? Youre making a simplistic assumption.

So much debt you have to use an exotic security to meet your cash flow.

Youre assuming need rather than desire. Lowering your mortgage can free up more cash to pay off higher interest lines of credit faster even if your current dti is acceptable.

What's an example of the carried higher debt whose risk profile makes this a good do?
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Re: ARMs aka won't people ever learn? [monty] [ In reply to ]
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monty wrote:
Youre assuming need rather than desire. Lowering your mortgage can free up more cash to pay off higher interest lines of credit faster even if your current dti is acceptable. //

Exactly. The loans they were describing in the article were the old anyone with a pulse can qualify for, not what is going on now. And I didn't get one for any other reason than to save money. I put 30% down on the house to keep the payment low and all that extra money I will put to use making more money. One way of course is to pay off higher interest cards or loans, but at the moment I have everything paid off, so I put it to work in the markets..

You're rare. Question, so you disagree with my asymmetric risk assessment?
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Re: ARMs aka won't people ever learn? [Leddy] [ In reply to ]
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Leddy wrote:
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No one is saying (at least I'm not) that they are inherently bad, just that they are not appropriate for most if not all people at present. You're missing the point of the asymmetric risk associated at this point in time. What you are missing also is that ARMs are based off LIBOR plus the tick. In a down market such as '08 LIBOR/money market froze up and you had a disconnect between it and treasuries. Like I said before I just think putting on this risk here has limited short term upside and significant long term downside.

Agree. They can work for some. What scares me about ARMs is being sold to people who don't really understand them and just hear the stories of how they work. With rates as low as they are the only reason I could see for there being an uptick is a hot real estate market and people using them to flip houses. Which unfortunately will lead to success stories and people who don't or shouldn't using them financing that way.

Exactly
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Re: ARMs aka won't people ever learn? [windywave] [ In reply to ]
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You're rare. Question, so you disagree with my asymmetric risk assessment? //

No I don't disagree at all, just pointing out that there are cases where these loans can be beneficial. The loans they give out now are nothing like the old ones, you have to jump through all the same hoops that everyone else does. I can see how some people just barely able to get into a loan because the ARM lowered the monthly payment enough could easily get hurt. They are literally gambling with their last dollar. I'm gambling with the houses money, and I have a very definite stop loss that does not kill me.


Perhaps their should be an added rule in getting these loans that you have to put down 20/25% to get them, that would bake in a lot of risk tolerance to the overall market on these loans. People tend not to default on homes where they have equity..
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Re: ARMs aka won't people ever learn? [windywave] [ In reply to ]
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windywave wrote:
monty wrote:
Youre assuming need rather than desire. Lowering your mortgage can free up more cash to pay off higher interest lines of credit faster even if your current dti is acceptable. //

Exactly. The loans they were describing in the article were the old anyone with a pulse can qualify for, not what is going on now. And I didn't get one for any other reason than to save money. I put 30% down on the house to keep the payment low and all that extra money I will put to use making more money. One way of course is to pay off higher interest cards or loans, but at the moment I have everything paid off, so I put it to work in the markets..


You're rare. Question, so you disagree with my asymmetric risk assessment?

I cannot imagine a scenario where short-term rates are HIGH and housing prices are LOW. (Our perhaps over active) Monetary policy will not allow that.

Additionally Monty is right: banks are holding high quality paper and offering terms that - even with maximum allowable rate increase - you are ahead for 8-10 years versus fixed.
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Re: ARMs aka won't people ever learn? [Leddy] [ In reply to ]
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Leddy wrote:
Agree. They can work for some. What scares me about ARMs is being sold to people who don't really understand them and just hear the stories of how they work. With rates as low as they are the only reason I could see for there being an uptick is a hot real estate market and people using them to flip houses. Which unfortunately will lead to success stories and people who don't or shouldn't using them financing that way.

I agree with you that those potentialities exist, but it should be pointed out that underwriting requirements are more stringent for arms than fixed mortgages.
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Re: ARMs aka won't people ever learn? [windywave] [ In reply to ]
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I think the vast majority of people getting ARM's do it so they can get more house than they can afford through a traditional mortgage.
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Re: ARMs aka won't people ever learn? [Perseus] [ In reply to ]
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I think the vast majority of people getting ARM's do it so they can get more house than they can afford through a traditional mortgage. //

Having gone through the process I would agree. They don't care one bit about how much money you have(outside of your down payment), it is all about monthly income and your payments. My father in law couldn't get a loan for a house, so he just paid cash. They dont care if you have millions in the bank, if you are on SSI and thats all your income, then you don't get the loan. I mean at some point they would give it to you, perhaps 60% down or something like that, but just a regular old 20% down, you need enough income to offset your monthly expenses and the payment.


It seems silly not to give loans to people like that, but I guess they just figure even if you have millions, you could spend it, or like that NY judge just give it to a scammer!! But on the other hand, you could also just loose your job or other income, so not really sure why assets have no place in getting a home loan..
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