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So the Market is Definitely Softening
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MegZee
My bunny
Member since 5/06 8777 total posts
Name:
Meaghan
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Re: So the Market is Definitely Softening
Posted by lululu
I was just thinking about this and I am curious - people who got IO's 5 years ago and are refinancing now - were the rates 5 years ago much better than they are now? i remember them being about the same.....
so essentially if someone really couldnt afford the increase in payment - they could probably re-fi and get another IO at a rate similar to what they were paying..... And that wouldnt have an impact on the market at all.....
Does this make sense? Or am I missing something?
the thing about IOs isnt really the interest rate...
what was happening to the principal that they should have been paying when they were only paying interest? It was added to the principal! so when they refi, there mortgage balance is actually higher, at a higher interest rate.
unless they were good and paid down alot of principal - but thats probably the minority. most people thought that they would be able to sell after 5 years and make enough equity.
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Posted 8/25/06 11:58 AM  |
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lululu
LIF Adult
Member since 7/05 9510 total posts
Name:
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Re: So the Market is Definitely Softening
Posted by Meaghan729
Posted by lululu
I was just thinking about this and I am curious - people who got IO's 5 years ago and are refinancing now - were the rates 5 years ago much better than they are now? i remember them being about the same.....
so essentially if someone really couldnt afford the increase in payment - they could probably re-fi and get another IO at a rate similar to what they were paying..... And that wouldnt have an impact on the market at all.....
Does this make sense? Or am I missing something?
the thing about IOs isnt really the interest rate...
what was happening to the principal that they should have been paying when they were only paying interest? It was added to the principal! so when they refi, there mortgage balance is actually higher, at a higher interest rate.
unless they were good and paid down alot of principal - but thats probably the minority. most people thought that they would be able to sell after 5 years and make enough equity.
Gotcha - I forgot about those people that want to sell - still, they should have made a good profit on their home in the past five years.....
I just have a feeling that it wont have as much of an impact on the market YET as people think, because banks will come up with a new way for people to afford homes that they really had no business buying in the first place.....
ETA: I do think that at some point all of this creative financing will catch up with people, just not quite so soon.
Message edited 8/25/2006 12:08:55 PM.
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| Posted 8/25/06 12:08 PM |
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MegZee
My bunny
Member since 5/06 8777 total posts
Name:
Meaghan
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Re: So the Market is Definitely Softening
Posted by lululu
Posted by Meaghan729
Posted by lululu
I was just thinking about this and I am curious - people who got IO's 5 years ago and are refinancing now - were the rates 5 years ago much better than they are now? i remember them being about the same.....
so essentially if someone really couldnt afford the increase in payment - they could probably re-fi and get another IO at a rate similar to what they were paying..... And that wouldnt have an impact on the market at all.....
Does this make sense? Or am I missing something?
the thing about IOs isnt really the interest rate...
what was happening to the principal that they should have been paying when they were only paying interest? It was added to the principal! so when they refi, there mortgage balance is actually higher, at a higher interest rate.
unless they were good and paid down alot of principal - but thats probably the minority. most people thought that they would be able to sell after 5 years and make enough equity.
Gotcha - I forgot about those people that want to sell - still, they should have made a good profit on their home in the past five years.....
I just have a feeling that it wont have as much of an impact on the market YET as people think, because banks will come up with a new way for people to afford homes that they really had no business buying in the first place.....
the fed is supposedly "Cracking down" on these untraditional types of mortgages. 
my aunts niece bought a house in FL with an I/O - only about two years ago - she wants to sell in five years and use the equity as a DP....i dont think thats going to happen now
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| Posted 8/25/06 12:24 PM |
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Hi-Fi55
12 years...wow....
Member since 2/06 2984 total posts
Name:
Dianne
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Re: So the Market is Definitely Softening
I think after a few more months of homes sitting on the marketing (with their astronomically prices), you are eventually going to see the FED step in and lower interest rates.
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| Posted 8/25/06 2:09 PM |
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MegZee
My bunny
Member since 5/06 8777 total posts
Name:
Meaghan
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Re: So the Market is Definitely Softening
Posted by Hi-Fi55
I think after a few more months of homes sitting on the marketing (with their astronomically prices), you are eventually going to see the FED step in and lower interest rates.
well they meet at predetermined times during they year, so they cant just increase and decrease the rates whenever they want....
and there are other factors besides the housing market...if they are worried about inflation they definitlely will not lower
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| Posted 8/25/06 2:36 PM |
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| Pages: 1 [2] |
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