* Low rate that only adjusts every 5 years for 30 years * Rate would adjust up to 2% or our prevailing rate, whichever is the lowest * Maximum lifetime adjustment that will not exceed 5% above the initial rate
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updated:
Apr. 13, 2012 @ 5:09p by ajohnamous
posted: Sep. 6, 2007 @ 3:32p
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You can get the lower rate by paying a 1% fee on the existing balance without having to reapply. If you want to get the ... (more)
GermanExpat (May. 21, 2012 @ 1:44p)
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No need to refi unless you want to. You should be able to do a rate modification for a 1% fee. I just did a rate mod to... (more)
KHTC (May. 21, 2012 @ 5:13p)
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I was almost pulling the trigger on a similar rate difference but then they told me on the phone if you pull 50k more out... (more)
GermanExpat (May. 21, 2012 @ 6:32p)
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Preview
APR Calculation: 5 year Treasury Note Margin of 1%
Reset Rate Calculation: The LOWER of the following: 1) The then prevalent 5/5 ARM rate 2) 5 year Treasury Note Margin of 1% rounded to the nearest 1/8th of a percentage
Combo Loans Minimum of 10% down Options for 2nd mortgage on 1/3/08 (YMMV) 5 year term at 7.24% 10 year term at 7.49% 15 year term at 8.49% 20 tear term at 8.99%
Holy crap, this is hot. Their prevailing rates are always at market levels or below. Worse comes to worse, if it resets higher, you can always refinance it.
therivler1 said: hate2work said: Isn't this just a 5 year ARM? What's the difference? Rate would adjust up to 2% or our prevailing rate, whichever is the lowest
Thrilla said: Holy crap, this is hot. Their prevailing rates are always at market levels or below. Worse comes to worse, if it resets higher, you can always refinance it.
If the rates are good after every 5 year this is a great program or if you plan to sell it in 5 years then also it is a good program. However, worst case scenario would be if the interest rate might be real high and refinancing would be real bad 5 years later. In fact, if it is very high you would be still better off with the 2% limit increase from Pen Fed then refinancing. However, in that case you would think at the time that you should have locked in 30 year fixed when you had a chance. Some risk but not bad.
Still, this is an awesome loan product by all means. Especially for people who are in refinance market and they are hammered with a huge increase since they were or ARM before.
therivler1 said: hate2work said: Isn't this just a 5 year ARM? What's the difference? Rate would adjust up to 2% or our prevailing rate, whichever is the lowest Interesting note in the disclosure: Your interest rate will never be less than 1.00 % over the term of the loan.
Thrilla said: Holy crap, this is hot. Their prevailing rates are always at market levels or below. Worse comes to worse, if it resets higher, you can always refinance it.
"..you can always refinance it."? I have had people (lenders) tell me that before, but there is a flaw in the reasoning. What if you purchase an overpriced house with little or no money down? For example, let us say you purchase a $500k 3/2 SFR in SoCal with this loan. In five years, the housing market has dropped and your house is now worth $400k. Do you think a lender would let you ReFi a $480k loan backed up by a house worth $400k? NO. You cannot ALWAYS refinance it. Some people are discovering this as we speak.
That said, I love PenFed and their products. 5/5 is a still good option for some people. As they say, "If you can find a better deal, TAKE IT!"
Just spoke to a CSR about the odd looking 5.625% rate with a 5.377% APR. He said that the APR includes a 1% margin that is not reflected in the rate. I dont know what he meant but clearly after 60 months, the rate will be the LOWER of 7.625% or then prevailing rate.
Now if we can compare the mortgage rates on a weekly basis to find out what the rates from a similar housing period looked like....
manuvns said: what is counted as prevailing rate ? is it 30 yr fixed rate ?
From the website:
"Your interest rate will be based on the lesser of an index plus our margin or the Lender's then- current interest rate for its 5 Year Treasury Index/5 Year Rate Adjustment loan product. The index is the weekly average yield on United States Treasury securities adjusted to a constant maturity of five years."
Basically this means the following: -- Lock in your rate at 5.5% today -- In five years pay the lower of { 5.5+2=7.5% } or { Existing rate on the 5/5 ARM } -- Repeat this every five years.
As per the CSR, the existing rate on the 5/5 ARM is indexed to the 5 Year Treasury Index.
Also as per the CSR, the margin on this product is 1 point (Hence low APR). This is HUGE, IMHO. Usually the margin on 5/1 ARMs is 2.5 - 3 points. Hence while others are paying a rate of x% + 3% on their adjusted rate, you are paying only lesser of { (x% + 1%) , (7.5%) } for five whole years! Whatever x% is in five years, this is a great deal. Awesome!
Some questions: What is the DTI ratio needed (debt to income)? Also, what LTV do you need to stay under to qaulify? Is there PMI if your over 80% ltv? Do you need to be in home for at least a year before they take new value vs. the purchase price? Do they take independant appraisal or use there own appraisers? Do they roll closing costs into the refi or can you pay upfront? Thanks.
discoganya said: Basically this means the following: -- Lock in your rate at 5.5% today -- In five years pay the lower of { 5.5+2=7.5% } or { Existing rate on the 5/5 ARM }Not quite. It will be the lowest of: previous rate + 2 = 7.5% (lower if you paid points, which you almost definitely want to do); 10.5% (the lifetime cap, meaningless at first); the index (5-year CMT) plus margin (which appears to be 1 percentage point); or the "current 5-year ARM rate," which I think means the rate Penfed is then offering on 5/1 ARMs.
FatMoneyClip said: In five years, the housing market has dropped and your house is now worth $400k. Do you think a lender would let you ReFi a $480k loan backed up by a house worth $400k?
I can think of another answer to that. If one of the best loan products out there resets to a higher rate than you want to pay, where are you going to refi at a substantially lower rate? If rates go up, they go up, and there's no way around it, outside of a fixed rate loan.
Can someone do an analysis of this product? I am not convinced it's an automatic great deal. It may be a good product if rates stay flat. It may be a good product, compared to the 5/1, if rates rise steadily. Wouldn't it be worse than a 15yr or a 30yr fixed, if rates continue to rise? If rates fall substantially, for the cost of refinancing, the fixed rate people can get the same deal as the 5/5 people right? What are the breakeven points when compared to other products? Under what scenarios would this 5/5 be superior to the rest?
I have done some calculations on the 5/5 ARM vs. a 30 year fixed. I used a modified spreadsheet that someone had posted a few years ago for the old Penfed 2/2 ARM. (Edit: The spreadsheet is now posted at the link below)
Here is the summary:
Assumptions: - $100,000 loan used for the example - 30 year fixed rate at 6.5% - 5/5 rate starts at 5.5% - 5/5 rate adjusts at worst case 2% every 5 years - 5/5 rate caps at 10.5% overall (last adjustment only 1%)
The break even point between the 2 loans for total interest paid and remaining principal is 124 months, or a little over 10 years. After that, the 30 year fixed is a better deal. Personally, I have the 2/2 loan that started in December 2004 and has already gone through its first 1% increase. I am considering replacing the 2/2 with this new 5/5 loan.
At the end of 30 years, the total interest paid on both loans is shown below (on top of the original principal):
30 Year Fixed = $127,544.49 5/5 = $168,868.02
Sorry to take up so much space for the numbers below. I can edit and remove them if it clogs up the thread.
Enjoy...
McDealio
Edit: Following jayK's good suggestion, I have removed the amortization tables and posted the spreadsheet using Google docs. This is my first try using it, so hopefully this works:
Please let me know if I have enabled the rights to edit and view this correctly. Hopefully, my personal email information isn't associated with the .xls. As I said, I haven't used Google docs before so this is new to me.
McDealio said: I can't post the whole spreadsheet right now, but I had done some calculations on the 5/5 ARM vs. a 30 year fixed. I used a modified spreadsheet that someone had posted a few years ago for the old Penfed 2/2 ARM.I would suggest removing the amortization table from your post and copying it to a Google Docs spreadsheet, which can be linked to.
discoganya said: wakebdr said: Has anyone done this yet?
I just bought a house and have locked into this product. I'll post my entire experience here in about a month.
Hey Discoganya: WHen you went through the on-line application did it reflect the "no closing costs?" I just applied last night and it listed all of the usual fees. I am assuming it was a general process for all of their loan programs and this would be adjusted.
jerlane said: discoganya said: wakebdr said: Has anyone done this yet?
I just bought a house and have locked into this product. I'll post my entire experience here in about a month.
Hey Discoganya: WHen you went through the on-line application did it reflect the "no closing costs?" I just applied last night and it listed all of the usual fees. I am assuming it was a general process for all of their loan programs and this would be adjusted.
Thanks, Jeremy
Yes, the application said no closing costs and there are none. (I don't quite recall what the online system said, but I confirmed this with my loan officer). There are other things that you end up having to pay for tho -- becoming a PenFed member, inspections (if your contract says that the buyer does the inspections), title insurance, a whole year of homeowners insurance, county tax and interest for the partial month during which you close.
McDealio said: Please let me know if I have enabled the rights to edit and view this correctly. Hopefully, my personal email information isn't associated with the .xls. As I said, I haven't used Google docs before so this is new to me.
McDealio, I too have a 2/2 that started October 2004. My rate then was at 3.5% 2/2 ARM. Can you plz show a comparison why you would want to swich to this 5/5 ARM over the 2/2 ARM?
I am also new to this....Is there an easy way for me to export this to Excel? WHen I try to all of the calculations disappear?
Thanks,
M
Quote: Please let me know if I have enabled the rights to edit and view this correctly. Hopefully, my personal email information isn't associated with the .xls. As I said, I haven't used Google docs before so this is new to me.
newyorkminute said: McDealio, I too have a 2/2 that started October 2004. My rate then was at 3.5% 2/2 ARM. Can you plz show a comparison why you would want to swich to this 5/5 ARM over the 2/2 ARM?
I have a 2/2 from around then, although my rate started at 3.625%
Assuming the following for the 2/2:
- $100,000 total balance at month 24 - 2/2 rate starts at 4.625% at month 24 - 2/2 rate adjusts at worst case 1% every 2 years - 2/2 rate caps at 12.0% overall <- is that true? that offer is no longer listed and I don't recall
And assuming you may refi your 2/2 into a 5/5 at month 24 into your 2/2... (I just couldn't quickly figure it out for month 36) My quickly run numbers show:
After month 48 into your 2/2, your payments would be smaller with the 5/5 if you had refied After month 204 into your 2/2, your total interest paid is higher than if you had refied with the 5/5 The entire time you are ahead on principal payments with the 2/2
So, if you are going to refi, only do it if you are going to be in the loan past month 204... or 15 more years from now. Unless you are looking for smaller payments... but there must be a better way.
I am looking at the spreadsheet and don't know if I am missing something. The payments in the spreadsheet don't match what shows on the mortgage calculator.
McDealio said: I have done some calculations on the 5/5 ARM vs. a 30 year fixed. I used a modified spreadsheet that someone had posted a few years ago for the old Penfed 2/2 ARM. (Edit: The spreadsheet is now posted at the link below)
Here is the summary:
Assumptions: - $100,000 loan used for the example - 30 year fixed rate at 6.5% - 5/5 rate starts at 5.5% - 5/5 rate adjusts at worst case 2% every 5 years - 5/5 rate caps at 10.5% overall (last adjustment only 1%)
The break even point between the 2 loans for total interest paid and remaining principal is 124 months, or a little over 10 years. After that, the 30 year fixed is a better deal. Personally, I have the 2/2 loan that started in December 2004 and has already gone through its first 1% increase. I am considering replacing the 2/2 with this new 5/5 loan.
At the end of 30 years, the total interest paid on both loans is shown below (on top of the original principal):
30 Year Fixed = $127,544.49 5/5 = $168,868.02
Sorry to take up so much space for the numbers below. I can edit and remove them if it clogs up the thread.
Enjoy...
McDealio
Edit: Following jayK's good suggestion, I have removed the amortization tables and posted the spreadsheet using Google docs. This is my first try using it, so hopefully this works:
Please let me know if I have enabled the rights to edit and view this correctly. Hopefully, my personal email information isn't associated with the .xls. As I said, I haven't used Google docs before so this is new to me.
mrblueyzz said: I am looking at the spreadsheet and don't know if I am missing something. The payments in the spreadsheet don't match what shows on the mortgage calculator.
McDealio said: I have done some calculations on the 5/5 ARM vs. a 30 year fixed. I used a modified spreadsheet that someone had posted a few years ago for the old Penfed 2/2 ARM. (Edit: The spreadsheet is now posted at the link below)
Here is the summary:
Assumptions: - $100,000 loan used for the example - 30 year fixed rate at 6.5% - 5/5 rate starts at 5.5% - 5/5 rate adjusts at worst case 2% every 5 years - 5/5 rate caps at 10.5% overall (last adjustment only 1%)
The break even point between the 2 loans for total interest paid and remaining principal is 124 months, or a little over 10 years. After that, the 30 year fixed is a better deal. Personally, I have the 2/2 loan that started in December 2004 and has already gone through its first 1% increase. I am considering replacing the 2/2 with this new 5/5 loan.
At the end of 30 years, the total interest paid on both loans is shown below (on top of the original principal):
30 Year Fixed = $127,544.49 5/5 = $168,868.02
Sorry to take up so much space for the numbers below. I can edit and remove them if it clogs up the thread.
Enjoy...
McDealio
Edit: Following jayK's good suggestion, I have removed the amortization tables and posted the spreadsheet using Google docs. This is my first try using it, so hopefully this works:
Please let me know if I have enabled the rights to edit and view this correctly. Hopefully, my personal email information isn't associated with the .xls. As I said, I haven't used Google docs before so this is new to me.
McDealio is correct. Mrblueyzz, remember to adjust the term when calculating the new PI. Such as: 100,000.000 5.5% 30Y= 567.79pi 92,460.6034 7.5% 25Y= 683.28pi 84,816.4690 9.5% 20Y= 790.60pi and on.
My question is about their tying the rate to the 5yr treasury. My google search on the 5 yr treasury shows (a/o 9/12) of 4.1, 4.21 for week ago, and 4.49 for month ago. So, do they reset monthly? weekly? or daily? prior to your lock. If margin is 1%, then shouldn't the rate be 5.21%
sandiegoperry said: Some questions: What is the DTI ratio needed (debt to income)? Also, what LTV do you need to stay under to qaulify? Is there PMI if your over 80% ltv? Do you need to be in home for at least a year before they take new value vs. the purchase price? Do they take independant appraisal or use there own appraisers? Do they roll closing costs into the refi or can you pay upfront? Thanks.
DTI < 40% Any LTV upto 95% PMI over 80% New value...probably on refis only They use their appraisers if they cant appraise online Dont roll ...with Penfed's chosen agency, closing costs are ~1k including Mortgage insurance.
I originally applied for the 5/1 ARM on July 28, and locked in at 5.375%. We weren't scheduled to sign until yesterday 9/14. Found out about the 5/5 ARM about a week ago, and asked to switch to that product. They were able to, and even keep the 5.375!
Basically, all communication with the loan processor and their preferred title company was through email, and the whole process went pretty smoothly.
Dont roll ...with Penfed's chosen agency, closing costs are ~1k including Mortgage insurance.
What do you mean by "don't roll?" Is there a reason not to use their closing agency? We are refinancing with this product, does anyone know if you still have to pay for title insurance with a refi? If so, can I use the same company we currently have and get a discount? I've never really understood title insurance.
I am a newbie when it comes to finance... So I apologize ahead of time for the questions...
My mother and I own the house (market value around $650K) we are living in now... We are almost done with the initial mortgage... I am looking into getting a new loan for about $40K to pay off my mother's debt (from a failed business venture)...
1.) would this deal be something which works for me? 2.) would it be advisable to refi another $15k for my tuition loan?
Thanks
I just need some directions to make sense of all the info in this thread... where can I read up on all the terms and perhaps can make an informed decision... Thanks again...
KHTC said: johnnybs said: Anyone know PenFed's rules about refi'ing if you are a current 5/5 holder? For instance, how long you have to wait to be able to do another 5/5, how much of a rate drop must there be, and if additional money is required to be taken out? I'll update the Quick Summary if someone has these answers. Thanks. No need to refi unless you want to. You should be able to do a rate modification for a 1% fee. I just did a rate mod to go from 3.875% to 2.875%. Added benefit is that the 5-year clock resets. * * * I was almost pulling the trigger on a similar rate difference but then they told me on the phone if you pull 50k more out you can get a reduced rate and the free closer. Obviously need quite some equity in the home and its a full refinancing so a lot more documents to prepare. But did save me 6k.
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