Sub2 Refi's - No Seasoning Req'd

[mpine 0]

This is an interest only product that can greatly help you increase your cashflow while possibly taking money out.

 

No Seasoning Reqired. You must properly use trusts in order to do this.

 

Credit Score LTV Cash Out - LTV Rate/Term

620-690 Fico 60% 70%

700+ 70% 80%

 

*Depending on the state LTV may go above 80% LTV

[Adam King (MI) 1]

Mike,

Great idea. You can try this too.

 

Find an owner that has good credit and take it over SLO (Sandwich Lease Option). Have them refi interest only to pull cash flow towards your favor. This is also a great vehicle with a CA that has too high of a payment. We just did one where the seller wanted a "dream home".

Here's how it went down:

 

1. Refi the CA property and pull $30K out. (Payment was interest only and now a hundred a month less even after the $30K taken out.)

2. Filled the property to get the new mortgage. Used the rental agreement to show the lender the debt was taken care of.

3. Financed the new house interest only with $30K down.

 

I totally agree with the interest only program. If you haven't read it yet, the first chapter of Ric Edelman's book; Ordinary People, Extraordinary Wealth" goes over some great stuff in detail on this topic. We have had some great deals pass over the table with the interest only program. The house I'm living in now was done that way.

Great post,

Adam

[mpine 0]

I agree, Interest Only is some great stuff... I have a Sub2 owner looking to take out 100k, reduce his payment by $550/mo... He is moving the properties on Rent to Own to get the most for his money.

 

Mike

:ph34r:

[MichaelC 160]

Mike, Adam and I discussed this very topic a few weeks ago on the phone. I'm of the mindset, however, that if something sounds too good to be true it probably is.

On the surface, interest only seems terrific. Reduced monthly payments, for sure. But what are the negatives associated with this?

And what terms are available with interest only mortgages? 15/30 year? Interest rates? Lo doc/no doc? Prepayment penalty? Etc....

For example, I took over a property a short time ago with some poor financing on it. It has a conventional thirty year fixed at 9%. It's in year five. Balance of about $115K. FMV around $275K. PITI around $1,325. Rents for $1,800.

So, you can see the cash flow is already excellent. What can an interest only note do for me with these particulars?

[mpine 0]

Mike, Adam and I discussed this very topic a few weeks ago on the phone.  I'm of the mindset, however, that if something sounds too good to be true it probably is.

On the surface, interest only seems terrific.  Reduced monthly payments, for sure.  But what are the negatives associated with this?

And what terms are available with interest only mortgages?  15/30 year?  Interest rates?  Lo doc/no doc?  Prepayment penalty?  Etc....

For example, I took over a property a short time ago with some poor financing on it.  It has a conventional thirty year fixed at 9%.  It's in year five.  Balance of about $115K.  FMV around $275K.  PITI around $1,325.  Rents for $1,800.

So, you can see the cash flow is already excellent.  What can an interest only note do for me with these particulars?

<{POST_SNAPBACK}>

 

It can reduce your payment greatly.

6.35% rate, 5 years Interst Only... The one sub2 deal I am doing will net my client $550/mo extra cash flow, while putting a nice chunk of change into his own pocket.

 

I am of the mind that this is a product meant for investors mostly, and not homeowners who may be getting in over there heads.

 

Mike

:ph34r:

[MichaelC 160]

6.35% rate, 5 years Interst Only

Meaning 30 year amortization with a 5 year balloon? What kind of LTV, Mike, for OO and NOO?

And how do you see it versus a 5/1 or 3/1 ARM, for example?

[-Tony- 0]

What about using a CoDI Loan, it seems you can get a better rate on the interest only and there are many option available on payments

[mpine 0]

What about using a CoDI Loan, it seems you can get a better rate on the interest only and there are many option available on payments

<{POST_SNAPBACK}>

I am working off the COFI and MTA. Rates start as low as 1.95%

[-Tony- 0]

Mike,

Could you explan the Pro's and Con's of using CODI/COFI/COSI for an investor. I was looking at it and I am not a broker so could you convert it into laymens terms. My jist was that even the interest only rate was lower by far then any other program. Andrew touched on something like this.

 

Thanks

[mpine 0]

The rates are lower, and are less volatile then traditional ARMS.

 

How is the COSI Calculated?

 

The monthly index is a ratio of monthly interest cost to total funds, expressed as a percentage.

 

Annualized Interest, the numerator, is calculated by multiplying the deposit balances at the end of each month by the weighted average interest rate of each account type that was effective on the last day of the month.

 

Total Deposits, the denominator, is the total balance of deposits on the last day of the month.

 

The quotient resulting from dividing the annualized interest by deposits, multiplied by 100 and expressed as a percentage, is the Weighted Average Cost Of Savings (COSI).

 

When is the Index Announced?

 

The COSI is computed on the last day of each month calendar month and is announced on or near the last business day prior to the fifteenth day of the following calendar month. For example, when the February COSI is announced on or near the last business day prior to the fifteenth of March. It is in effect until the announcement of the March COSI in April.

 

Historically, the COSI has moved up and down much less rapidly than indexes based on the PRIME Rate, the Federal Reserve discount rate, or Treasury bill rates. This is because COSI is composed primarily of fixed-rate deposits of varying maturities (i.e. C/D's.) Since rates on these deposits are not affected by changes in market interest rates until the deposits mature, the average interest rate on deposits in a particular month reflects, to a significant degree, interest rates that were in effect in previous months. Thus, when market interest rates for deposits move up or down, COSI will lag and generally not move as rapidly or to the same extent. The COSI and the COFI or Cost Of Funds Index, are the slowest moving and safest indexes in the world for mtg. lending.

 

__________________________________________________________________

The 12-month MTA-Index (Month Treasury Average) is based on the average annual monthly yields of U.S. Treasury Securities, (T-Bill) adjusted to a constant maturity of one year, as made available by the Federal Reserve. This Index is determined by adding together the monthly yields for the most recent 12 months and dividing by 12. Because it’s an average, higher yields in some months are offset by lower yields in others. This Index has averaged below 5% over the past 14 years (see History of the MTA.)

 

If you add the current monthly MTA-Index to a Margin and it will equal the current monthly "fully-Indexed" Rate; the Margin never changes. Over the last fourteen (14) years, with Mr. Greenspan continually increasing then decreasing the PRIME Lending Rate, the MTA-Index has averaged below 5%. Therefore, if you're worried about the Life Cap (Index + Margin) going up to its max of 9.95% you need to understand how the MTA moves. E.g., if you had a 2.0% Margin, the MTA-Index would be capped at 7.95%, or 9.95% - 2.0% = 7.95%. Again, this Index has averaged below 5% over the past 14 years. This low average is one of the main reasons why none of our past Clients have never needed to refinance off of this mortgage program. Because when Fixed-Rates start to drop so does the MTA-Index. Moreover, when the Fixed-Rates start to move higher, the MTA-Index moves slightly higher, and very slowly.

[-Tony- 0]

Are these NOO loan rates

[mpine 0]

Rates can be as low as 2.95% for N/o/o, depending on which loan is best for your situation. Most of the loans I have had in this category have come in around 3.95%-4.95%.