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Posted by Jeff Strickland on April 25, 2005, 11:00 am
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> To the original poster:
>
> Your current mortgage situation is not uncommon. Everyday, all over the
> country, people just like you will an 80/20 to avoid mortgage insurance.
> Brokers, like myself and Jeff, will tell people that it is a good idea and
> it is, but there are alternatives.
>
> Other than the terms being somewhat confusing do to the fact that it is a
> variable rate that can increase at anytime with no warning, you need to
take
> into account how it will also affect your credit score. At this point,
you
> have a $69,000 credit line which is essentially maxed out. If you run
your
> credit in 6 months, you will find that your scores will have probably
> dropped by atleast 40 points or more. Thats not good.
>
> If you can afford to pay an additional $1000 per month to apply toward
your
> principle you might be better off refinancing the home and making a higher
> payment at a fixed rate. I would recommend a 95% rate/term refi with
TAMI -
> Tax Advantage Mortgage Insurance. TAMI is a PMI alternative where instead
> of paying PMI, you would pay a slightly higher interest rate, that way the
> additional monies you pay each year are still tax deductible.
>
> The bottom line is, you obviously don't like the HELOC you have - guess
> what, it's only going to get worse. The fed raises that rate .25%
everytime
> it increases it, and the rumor is that it may raise 2 more times this
year.
> Get out of it. Talk to Jeff, he will probably agree with me.
>
> Joel Britt
> NationOne Mortgage
> Columbus, Ohio
>
I do agree, except for one small detail, the Fed. The rate increases can be
in .125% increments, they do not need to be in .250% increments, and there
could be no increase at all or there could be a decrease. Having said that,
then could be increases (or reductions) in .500% increments or .375%. The
Fed drives the bus on the Discount Rate, and the Prime Rate parallels the
Discount rate by precisley 3%, ifthe Discount Rate is 2%, then the Prime is
5%, if 2.75% Discount, then 5.75% Prime, or 1% then 4%. Whichever way the
Discount Rate moves, the Prime also moves to maintain the 3% spread.
I am not sure I understand why the Fed moves the rate because they say stuff
that I just don't see going on. They have the benefit of the "helicopter
view" where my view over the berm of the ditch I am in tends to obscure what
I can see.
Joel, I haven't seen that a HELOC is treated on a Credit Report like a
consumer line, are you sure this happens?
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