Author Topic: US Mortgage - ARMs  (Read 3343 times)

daverobev

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US Mortgage - ARMs
« on: October 31, 2014, 01:47:15 PM »
Hopefully someone can explain. I have knowledge of UK and Canadian mortgages. Looking at options in the US.... but there is only one, RBC Bank, and they only do ARMs (they work with Canadian credit).

Just did a quote, it comes out as 4.75% "rate" but 3.6% APR for a 5 year ARM, fees of $3200. Cannot go up more than 5%, can't go down more than 2.25%, etc etc. So do I take it that the 4.75% includes paying off the $3200 in fees over the 5 years? And it's the 4.75% that is the base (ie mortgage can be 2.5% - 9.75%)?

3 year is 4.375%, 7 year is 5% - are these really bad rates? Bearing in mind I have no choice in lender...

This is for an investment loan, btw.

windypig

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Re: US Mortgage - ARMs
« Reply #1 on: October 31, 2014, 01:50:20 PM »
Those are bad rates on an ARM, yea.

daverobev

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Re: US Mortgage - ARMs
« Reply #2 on: October 31, 2014, 02:00:08 PM »
Those are bad rates on an ARM, yea.

Bad for an investment property or a primary residence though?

If I change to vacation property, it goes to 3.5/3.875/4.125 for 3/5/7
« Last Edit: October 31, 2014, 02:01:47 PM by daverobev »

arebelspy

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Re: US Mortgage - ARMs
« Reply #3 on: November 01, 2014, 09:08:18 AM »
If you have no choice and no alternative, then why are you trying to compare it to other rates that you can't get?

Yeah, it's bad compared to other rates.  The question for you though is it better than not financing (either not buying or paying cash)?  Those are the numbers you need to run.
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daverobev

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Re: US Mortgage - ARMs
« Reply #4 on: November 01, 2014, 10:07:58 AM »
If you have no choice and no alternative, then why are you trying to compare it to other rates that you can't get?

Yeah, it's bad compared to other rates.  The question for you though is it better than not financing (either not buying or paying cash)?  Those are the numbers you need to run.

Well, yes. I'm trying to feel that out. I certainly don't want to buy something that expensive all cash - exchange rates are bad. So it's between a $40k ish place that rents for $600, or $125k house or duplex 40% down. It doesn't seem like the returns will be as good on the latter, I don't think someone's going to pay more to rent a spot in a duplex than they would to rent a whole house. Obviously if I could find a great deal it's make sense.

You're right, it doesn't matter if the rate is bad as long as it makes money. Being capped to 9.75% seems pretty good actually - I was a child, but I remember when the rates were crazy and my mum was in arrears on the house I grew up in. 9.75%, in that context, doesn't seem all that bad.

The most frustrating thing is their $75k min loan/40% downpayment rule for investments. It means that even if I could find a decent duplex and knock them down... to $100k, say, with an estimated $1600 income, I can't do it. And I don't want to put in $100k cash.

Frustrating.

arebelspy

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Re: US Mortgage - ARMs
« Reply #5 on: November 01, 2014, 10:48:43 AM »
Yeah, those terms are terrible. Can you partner with someone who can get a traditional mortgage for better terms?

Plenty of people may be happy to get the mortgage, with you making a down payment.

What area are you looking to invest in?
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daverobev

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Re: US Mortgage - ARMs
« Reply #6 on: November 01, 2014, 11:31:55 AM »
I tried my cousin before... he wasn't really interested.

Looking for another place in TX. If that doesn't pan out I'll probably look in FL in person (TX remotely). I'm getting zero positives with other lenders, unfortunately. Might just pick one more up, much cheaper, all cash and be done with it.

I guess the other way would be to take out a margin loan with Interactive Brokers for part of it. Those are the only ideas I have.

What is a good rate for a 5/1 ARM? I might see if they can cut their rates if I stick a large chunk of stocks with them.

arebelspy

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Re: US Mortgage - ARMs
« Reply #7 on: November 01, 2014, 01:19:56 PM »

I tried my cousin before... he wasn't really interested.

Partner up with a real investor. There's plenty that would be happy to take on private money for a split of profits.
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daverobev

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Re: US Mortgage - ARMs
« Reply #8 on: November 01, 2014, 03:35:25 PM »

I tried my cousin before... he wasn't really interested.

Partner up with a real investor. There's plenty that would be happy to take on private money for a split of profits.

Hmm. Where does one find one of those that is 100% trustworthy? Biggerpockets? I am NOT a people person.

arebelspy

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Re: US Mortgage - ARMs
« Reply #9 on: November 01, 2014, 05:45:39 PM »
Sure, BP is a good place to start - talk with investors working in the area you're interested in. Let them know you're interested in investing there and ask about the market (something you'll want to do anyways).

The ones who are helpful and forthcoming see about what they specifically are doing. You'll quickly learn about their projects, if they use other investor's money, etc.

We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
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