Technologic80
New Member
Cash: $ 1.50
Posts: 7
Joined: 10 Jan 2006
Location: Michigan
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| 125% mortgage?? |
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I got a flyer in the mail today from newday financial about refinancing your house up to 125%. whats the general consensus about this? I know its bad and all because equity would be a non-existant thing for a while.
But do these banks offering 125% somehow screw you over like making it interest only loans? Besides over extending yourself, whats the catch?
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Sun Jan 22, 2006 12:28 am |
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Rolo
Yo' Daddy
Cash: $ 309.70
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Location: Colorado/Florida
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quote:
Originally posted by coaster
2) own an appreciating asset. With this type of loan you throw out #2 for a heck of a long time.
Whether you owe money on said asset or not has no bearing on whether it is appreciating in value or not.
"Expect me when you see me."
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Mon Jan 23, 2006 2:29 am |
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Rolo
Yo' Daddy
Cash: $ 309.70
Posts: 1551
Joined: 13 Mar 2005
Location: Colorado/Florida
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hehe
quote:
Originally posted by coaster
All you "own" is a liability.
Not true! You still own the property! Sure, you owe more than it is worth, BUT ISN'T THAT THE WHOLE POINT OF HAVING EQUITY? To use it for leverage rather than just sitting there, doing nothing, merely saying you 'own' a piece of your house?
Re: 125% thing...what is the rate they are offering?
"Expect me when you see me."
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Mon Jan 23, 2006 1:19 pm |
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WorkerBee
New Member
Cash: $ 0.80
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Location: Phoenix Az
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125% loans were created to promote the rehabilitation or enhancement of real property-usually if you apply for one of these - the lender needs to see a punch list of the repairs/enhancements to be performed before the loan proceeeds are disbursed. Your profile says you enjoy working on your house-your lender must be aware of this fact or else is would not make sense to offer this type of product to you. I work in the mortgage industry.
(in other words if you can't show a plan of action (repairs/enhancements that will promote increased value of the property) Then the lender cannot give you this type of loan. IE: NOT legal to provide this type of loan to a party that lender knows will use loan proceeds for purpose other than property improvements. This is the general rule across America.
Hope this info helps you understand better. 
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Tue Jan 24, 2006 7:52 am |
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Kirby
Contributing Member
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Location: Atlanta, GA
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Sounds like trouble to me! Are you thinking of taking it?
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Wed Jan 25, 2006 5:52 am |
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JCook
Full Member
Cash: $ 11.20
Posts: 56
Joined: 24 Jan 2006
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Your gut feeling was that it was bad and you were right. The alarm went off in your head, pay attention to it.
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Tue Feb 07, 2006 12:30 am |
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mytoolbox
First Time Poster
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Location: Conshohocken, PA
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| You should do the loan if... |
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After reading some of the replys here it is obvious that all of these people have no idea how the 125% market even works in the mortgage industry nor do they know anything about how true mortgages work.
Let me clarify it for you. If you have received a mail piece from NewDay Financial, you probably have a significant amount of revolving debt, and very little equity in your home. In most cases, it is the only solution for someone who is paying on average 20% in interest on revolving debt (much higher than the interest you pay on your home anyway). Plus, revolving debt accumulates daily, not monthly like a mortgage, so $10,000 in revolving debt is not the same as a $10,000 home mortgage, even if they are at the same interest rate.
You see, when you refinance, you get a lower interest, but does it really do you any good? You may argue yes, because the lower interest may give you a monthly savings, but you usually extend the time it takes to pay it off and pay fees, so you haven't gained anything in the long run, though in the short run it looks good. That's how they sell you on the loan in the first place. A quick fix, and what you gain now...clouding the long run. So if you wanted to argue that their rates are high, you do not understand how the loan works.
NewDay Financial has had no complaints from the BBB in 6 years, and their default rate is 1 loan out of 20,000 in the past 6 years (I did my research on these guys, they have the best default rate in the country and major investment banking firms on Wall Street are trying to figure out how they are doing it) even though their rates are higher and their fees are higher (because of the risk they are taking on by giving a loan like this to an individual who has a lot of revolving debt). That is saying something. You'd think if they charged higher on both counts they'd have some complaints by now.
On average, the NewDay Loan is paid off within 15 years, and their average client boosts their credit scores by 70 points within the first few months.
Again, that is saying something.
So before you knock a company that offers a 125% LTV, you should determine first if you are suffering financially and have need of that type of loan that will boost your credit score and get rid of a significant amount of credit card debt that you are probably paying 20%. By putting it into your home mortgage, you will get a tax shelter and lower the interest you are throwing away on the revolving debt anyway. The short term may look bad, but the long term will give you the financial strength to be back on your feet again. Unfortunately, the average person doesn't think about the long term, just the quick fix, which is why I had to write this. It is sad that we want the solution now without realizing that the solution that looks bad now is actually the better solution for our future financial strength.
If you have financial diabetes, why would you get counsel from someone who is not a licensed financial physician?
Steve-o
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Mon May 22, 2006 3:04 pm |
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Mistajohn
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Mytoolbox is absolutely correct and I've heard NewDay is great.
I took out a 125 Refinance in September to FINALLY pay off my medical and credit card debt. I actually refinanced for a better rate too - so win/win. I needed a good amount of money so 125 was the only way I was going to get it - I have no regrets. It really depends on your situation and living in a booming city where values skyrocket works in your favor too. There's some free consultations available on the net - www.125refi.com is a good one. eloans.com will have lenders fight over your business if you want. lol.
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Sat Jun 10, 2006 3:18 am |
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Rolo
Yo' Daddy
Cash: $ 309.70
Posts: 1551
Joined: 13 Mar 2005
Location: Colorado/Florida
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| Re: You should do the loan if... |
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quote:
Originally posted by mytoolbox
If you have financial diabetes, why would you get counsel from someone who is not a licensed financial physician?
Because they do not have a conflict-of-interest and because licensed not not automatically mean correct or competent.
"Expect me when you see me."
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Sat Jun 10, 2006 4:29 am |
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