Author Topic: Mortgage hacking with penfed  (Read 4721 times)

DK

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Mortgage hacking with penfed
« on: March 08, 2014, 01:20:40 PM »
I'm trying to take advantage of the 5/5 ARM at penfed (that hops around a bit but is currently at 2.75%). My current rate is 4.375%. The problem is I do not have 80% equity yet. I'm probably close to 10K away from it. I see that they also have a HELOC at 2.49%. Does anyone know if I could initiate both of these at the same time? So basically use the HELOC to get to 80% equity, and get the 5/5 ARM at the same time?

Or maybe there is a reason I should not do this at all?

And it seems I could repeatedly do this as long as the HELOC rate is lower than the ARM rate to accelerate the payoff of the mortgage? It's only about a 1/4%, but longterm that still makes a difference, plus it would still be tax deductible too.

mc6

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Re: Mortgage hacking with penfed
« Reply #1 on: March 08, 2014, 02:44:53 PM »
Give them a call and ask. 

A refi and a HELOC sounds like a bad idea to get to 80% to me, but I tend to be conservative when it comes to home $.

stpetesean

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Re: Mortgage hacking with penfed
« Reply #2 on: March 08, 2014, 03:59:23 PM »
No, the maximum combined loan to value for that loan is 80%.  That includes any other loans such as the HELOC.

DK

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Re: Mortgage hacking with penfed
« Reply #3 on: March 09, 2014, 07:43:13 AM »
No, the maximum combined loan to value for that loan is 80%.  That includes any other loans such as the HELOC.

So that means even if I found cash to hit the 80%, I would not be able to get a HELOC, because I am right at the 80% mark? That puts a little hitch in my plans...

arebelspy

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Re: Mortgage hacking with penfed
« Reply #4 on: March 09, 2014, 10:17:35 AM »
No, the maximum combined loan to value for that loan is 80%.  That includes any other loans such as the HELOC.

So that means even if I found cash to hit the 80%, I would not be able to get a HELOC, because I am right at the 80% mark? That puts a little hitch in my plans...

You stated you need 80% equity.. you sure you don't mean 20% equity, 80% LTV?

In either case, cash is fine.

You need to have the amount of equity they're requiring (I'm guessing 20%, though you say 80%), basically.  If you have a HELOC on top of a first mortgage, that could make it so you don't have that equity, you have loans for over that percent of the value.

I'd recommend if you can get the cash trying to get the HELOC at 80% of the value and use that to pay off the first, and have your whole balance at 2.49%.

This is assuming you can pay off the whole thing in 5 years, which is what you're aiming for.  That's the only time I'd recommend this PenFed loan, someone looking for a short term very low rate in a push to pay off their mortgage.

If you actually are close to 80% equity, and can pay that last 20% in the next 5 years, do that. 

If you don't yet even have 20% equity, I'd keep your fixed rate, or look for another fixed rate mortgage personally.
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DK

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Re: Mortgage hacking with penfed
« Reply #5 on: March 09, 2014, 11:41:11 AM »
Yeah, sorry, I got dyslexic on my numbers, I am trying to get to 20% equity.

Considering it is locked every 5 years, and can only go up 2% max, I was actually looking at doing it in 10 years. Worst case there is I get 2.75% for 5 years when my mortgage amount is highest, and the last 5 years it is at 4.75% (only .4% higher than now). The interest savings the first 5 years with the higher amount would more than cover the 5 years at a slightly higher rate than it is now.

Thanks for the advice though. More options to weigh.

arebelspy

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Re: Mortgage hacking with penfed
« Reply #6 on: March 09, 2014, 11:48:47 AM »
Yeah, sorry, I got dyslexic on my numbers, I am trying to get to 20% equity.

Considering it is locked every 5 years, and can only go up 2% max, I was actually looking at doing it in 10 years. Worst case there is I get 2.75% for 5 years when my mortgage amount is highest, and the last 5 years it is at 4.75% (only .4% higher than now). The interest savings the first 5 years with the higher amount would more than cover the 5 years at a slightly higher rate than it is now.

Thanks for the advice though. More options to weigh.

Gotcha, that makes sense!  Thanks for the explanation.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (occasionally) blog at AdventuringAlong.com.
You can also read my forum "Journal."

Nords

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Re: Mortgage hacking with penfed
« Reply #7 on: March 09, 2014, 11:20:26 PM »
Or maybe there is a reason I should not do this at all?
PenFed uses contractors to process their mortgages, and PenFed staff are not very knowledgeable themselves on the process.  When they're good, they're cheap.  When they're bad, they're world-beating awful.

Here's two threads on Early-Retirement.org.  One of them was over three years ago but I still cringe at the memories.
http://www.early-retirement.org/forums/f28/whaddaya-do-all-day-penfed-mortgage-refinance-53681.html
http://www.early-retirement.org/forums/f28/another-bad-penfed-customer-experience-60161.html