I am planning to take 7 yr ARM mortgage (conforming: similar to 30yr
fixed for the first 7yr years). I think I am not going to stay in my
home longer than that. Would you please help me compare 2 different
mortgages ?
Selling price 255K
1) No-fee mortgage from Bank of America:
They pay for closing cost and survey (part of the program). I have
locked the rate at 6.25 which means that 7 yr ARM would go for 5.625
(~0 points). I need to pay 5% down ($12750) and I am not going to pay
PMI. (part of the program - even with 5% down). So PI only would be
ca. 1394 (Insurance $80, Taxes $433 so PITI comes to $1907)
2) Wholesale countrywide program offered thru some broker
7 yr ARM, 0% down, rate locked at 5.125 with CW. As I wanted "lender's
paid PMI" my rate jumped to 6%. So my PI = 1528, (I= $83, T =$ 433,
PITI = $2044). Cost of brokerage + closing = 3.5K
If I go with BofA I pay 12750K down, but I have lower payment by $137,
I do not pay closing costs..
If I go with CW I pay 0% down, but I pay 3.5K in closing costs ...
When I took an amortization table I figured that If I stayed in the
house for exactly 7 yrs (then sold or refinanced) I would pay $90.5K
in interest if I went with BofA (242250 at 5.625%). I would pay $102K
in interest if I went with CW (255K at 6%)..so over 7 yrs there is
savings of ca. $12K. (PV ~ $8K, based on time value of money..)
It seems for me I should go with CW
+ less $$$ upfront
+ If I stay only say, 3 yrs the difference in interest would be even
less
+ declining values of homes...what If my place will be worth 230K in 2
yrs ? Austin, TX market is one of the best in US however nobody knows
how serious the crisis is ...so my take is ...instead of building equity
that might evaporate, perhaps I should use some of that downpayment
to update the house (1978 yr, located in prime Austin neighborhood,
however dated but clean)
Pls help out ..
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