Construction Loan to Final Mortgage

[treillw]

Finishing up building and ready to convert our construction loan to a 30 year mortgage.

Any advice?

Places to shop for rates?

Think rates will drop any lower?

First time doing this and appreciate any help!

Thanks!

 

[bozeman]

I actually used my local bank. Go 15.......if you can. Were around 3%. Tough to beat that. Congrats on the new home!!

 

[2five7]

Rates are crazy low right now! Look hard at doing a 20 year instead of 30, to me it's the sweet spot. 15 raises payments more than I'd want.

Example, on a 300k loan here's how it breaks down, based on rates at my local CU. (does not include property tax, insurance, or god forbid, PMI)

30 year, 3.125% $1285.13 monthly----$462,645.49 total payments
20 year, 2.75% $1626.50 monthly----$390,359.74 total payments
15 year, 2.375% $1982.76 monthly----$356,897.32 total payments

raising your payment $350 saves you a decade, and $72,000
Going to a 15 saves even more, but less dramatic results.

 

[rvanbw00]

With rates this low, Id consider locking in a 30 year and paying as much as you can extra every month. If you work out the numbers, you can still end up saving more money this way than going with a 20 year, but in the event of hard times, you can revert back to your lower 30 year minimum payment.

We just refinanced at a 30 year for about 2.5% and with what we are paying extra every month will have it paid off in 15 years.

 

[manitou1]

We locked a 30 yr. at 2.75% about three weeks ago, with Bay Equity.

 

[HuntHarder]

I just closed on my refi, locked in 2.5 with an APR of 2.6% on a 15 year. I went thru B of A because of the discounts they offered because of my other account balances.

 

[String&stick]

Shop a few banks that put mortgages on the secondary market.

Rates have been bumping around a bit lately and probably are more likely to bump up than down. It won't be dramatic but it has come up 1/8th of a percent from the lows we saw a few months ago.

If you have good credit and the loan is over $200,000 I wouldn't settle for a rate over 2.85 on a 30 or 2.75 on a 20 right now.

 

[MattB]

I would move with some urgency as everything points to rates edging up over time.

My personal preference is the 30 year and then prepay the extra principal if you value the flexibility. If the monthly nut on a 15 year am is comfortable, that is a good option as well.

We refi'd rentals recently (locked rates the day before the inauguration) at 2.75% and 2.875%. I think primary residence mortgages were in the 2.25% range at the time.

 

[EastCoaster]

We refinanced a couple months ago into a 15 at 1.99%.....basically it’s costing me an extra $100 to cut 10 years off my mortgage. Rocket was easy to deal with for us.

 

[bozeman]

Be careful and don't fall into the trap of 'pay extra each month to pay it off early if you get a 30 yr mortgage' and then not pay extra.......in the example above simply paying a 15 vs 30 year saves over $100k in payments over the lifetime.....think what you can do with an extra $100k.........

 

[BuckHunter24]

I managed to hit a spike and got 3.3%. But I'm not complaining I think its a pretty dang good rate still. The person we worked with did say rates were starting to climb and would probably keep climbing

 

[NDGuy]

Be careful and don't fall into the trap of 'pay extra each month to pay it off early if you get a 30 yr mortgage' and then not pay extra.......in the example above simply paying a 15 vs 30 year saves over $100k in payments over the lifetime.....think what you can do with an extra $100k.........

It's all about where someone is at in life.

Most first time or young homebuyers can't afford $700-1000 more a month for a mortgage.

But I can afford throwing in an extra $100-200 of principal and not be screwed if I were to lose my job or have a huge expense come up like a medical emergency.

Also if one is doing well enough in life to not worry about an extra 500-1000 a month. Consider doing a 30 year and invest that extra money into an IRA or cash account. Bet you will beat the interest savings over 15 years.

 

[bozeman]

It's all about risk......as you stated 'its a bet'........I prefer the guarantee $100k savings rather than a potential for $XX gains........to each his own. I've yet to speak to anyone face to face (not internet garb) that has regretted paying off their mortgage.

 

[rayporter]

discipline, discipline, discipline.
paying that sucker off early is one hell of a GOOD feeling.

 

[MattB]

It's all about risk......as you stated 'its a bet'........I prefer the guarantee $100k savings rather than a potential for $XX gains........to each his own. I've yet to speak to anyone face to face (not internet garb) that has regretted paying off their mortgage.

A former client - very astute person financially - used to have a target loan to value ratio for his house, and as values appreciated he would periodically refinance because he said he "owned too much of his house". He would presumably put the cash out into the stock market where, over time, it would undoubtedly be a better financial investment than paying off a mortgage.

Having a low cost mortgage and only making the minimum payments while investing any excess cash is a far better way to build wealth than to pre-pay a 3% mortgage. Far better.

For those who want to pay extra principal each month but fear you may lack that discipline, build it into a monthly auto-draft at loan inception so it takes some effort not to make the additional payment. Might also make a deal with yourself on what limited conditions you would reduce the payments.

 

[JakeSCH]

A former client - very astute person financially - used to have a target loan to value ratio for his house, and as values appreciated he would periodically refinance because he said he "owned too much of his house". He would presumably put the cash out into the stock market where, over time, it would undoubtedly be a better financial investment than paying off a mortgage.

Having a low cost mortgage and only making the minimum payments while investing any excess cash is a far better way to build wealth than to pre-pay a 3% mortgage. Far better.

For those who want to pay extra principal each month but fear you may lack that discipline, build it into a monthly auto-draft at loan inception so it takes some effort not to make the additional payment. Might also make a deal with yourself on what limited conditions you would reduce the payments.

^ This only if you are are disciplined. You can automatically put that money into an investment account where basic funds can earn you double / triple your interest rate over that same 15 years.

Some feel more at peace having no house payment, I personally feel more comfortable having the ability to pay the loan off while earning more interest than I am paying.

To the OP's original questions, check out Loan Depot or other lenders on Zillow. You will find competitive offers. I went with Wells Fargo on my recent home purchase because they gave me a 2.75% rate on a 1.2 loan.

 

[bsnedeker]

^ This only if you are are disciplined. You can automatically put that money into an investment account where basic funds can earn you double / triple your interest rate over that same 15 years.

Some feel more at peace having no house payment, I personally feel more comfortable having the ability to pay the loan off while earning more interest than I am paying.

To the OP's original questions, check out Loan Depot or other lenders on Zillow. You will find competitive offers. I went with Wells Fargo on my recent home purchase because they gave me a 2.75% rate on a 1.2 loan.

Yeah, I agree with all of this. When I refi'ed last year I dropped my payment by 300. I looked at the numbers over the 30 years of the loan, interest savings vs. investment income and with even a modest return over the 30 years of my loan it wasn't even remotely close. That 300 now gets auto-invested every month.

 

[ande7824]

With rates this low, Id consider locking in a 30 year and paying as much as you can extra every month. If you work out the numbers, you can still end up saving more money this way than going with a 20 year, but in the event of hard times, you can revert back to your lower 30 year minimum payment.

We just refinanced at a 30 year for about 2.5% and with what we are paying extra every month will have it paid off in 15 years.

That is very similar to what we did as well. I like having the "net" to fall back on if needed, but continue to overpay when possible. Whoever you go with it is a good idea to make sure you know exactly how extra payment is applied though. Mine goes right to principle, but I have heard some banks get sneaky and can apply it in non-advantageous ways.

 

[bozeman]

Also, to the OP.....see if you can make weekly payments (smaller $ increments) and also ensure no early pay-off penalty. Paying for a house is good, owning a house is 'gooder'.

 

[JakeSCH]

Also, to the OP.....see if you can make weekly payments (smaller $ increments) and also ensure no early pay-off penalty. Paying for a house is good, owning a house is 'gooder'.

Also good advice! You can setup your payments bi-weekly and it cuts like 7 years off of a 30 year loan.