PenFed 5/5 ARM at 2.875%??!!

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Ketawa
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PenFed 5/5 ARM at 2.875%??!!

Post by Ketawa »

I'm only making this thread because I had a rate watch for the PenFed 5/5 ARM, with the intention of possibly refinancing next year into it or a 3/5 ARM from NFCU. This started to seem like a pipe dream as rates ticked up over the last couple months. My current rate is 3.00%. Unfortunately, I'm still about 10 months or so away from being able to refinance.

Surprise, surprise, the rate dropped from 3.125% to 2.875% over the weekend. How is this possible? 5-Year and 10-Year Treasuries are basically at a two year highs. Maybe they had new loan applications dry up, and needed to bring up demand again?

Actionable: I would be shocked if anyone could find a better rate. If you've been hoping to refinance, jump on it now!
Last edited by Ketawa on Wed Sep 18, 2013 2:19 pm, edited 1 time in total.
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by cflannagan »

Ketawa wrote:I'm only making this thread because I had a rate watch for the PenFed 5/5 ARM, with the intention of possibly refinancing next year into it or a 3/5 ARM from NFCU. This started to seem like a pipe dream as rates ticked up over the last couple months. My current rate is 3.00%. Unfortunately, I'm still about 10 months or so away from being able to refinance.

Surprise, surpise, the rate dropped from 3.125% to 2.875% over the weekend. How is this possible? 5-Year and 10-Year Treasuries are basically at a two year highs. Maybe they had new loan applications dry up, and needed to bring up demand again?

Actionable: I would be shocked if anyone could find a better rate. If you've been hoping to refinance, jump on it now!
As long as one understands this is an ARM and is okay with rate increasing up by 2% every 5 years, yes, go for it. I refi'd with 5/5 ARM with Penfed last April, at 2.875%.

Even if it increases by max of 2% 5 years later, it would still be under my former rate of 5.5%. So, that's at least 10 years of sub-5.5% rate. Can't beat that.

The best thing: they truly pay 100% of your closing costs. Literally. THey pay for assessment, title insurance, fees, etc.. you only need to bring prepaid interest and principal, which would have been your cost anyway. The "closing costs" they covered for me totaled $5,900+.

Caveat: If I refi or pay off this loan less than 36 months, I have to pay back $5,900. Which I'm perfectly fine with.
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Ketawa
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by Ketawa »

Yeah, I only made the thread because I was surprised at the drop in the rate. Like you mentioned, it was 2.875% for you in April. The 5-Year is about 60 bp higher now, and the loan rate inexplicably drops.

My current loan is also a 5/5 ARM issued in July through NFCU (no PMI for 90% LTV). I still need a few months before I would be able to refi at 80% LTV for the PenFed loan.
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by cflannagan »

Ketawa wrote:Yeah, I only made the thread because I was surprised at the drop in the rate. Like you mentioned, it was 2.875% for you in April. The 5-Year is about 60 bp higher now, and the loan rate inexplicably drops.

My current loan is also a 5/5 ARM issued in July through NFCU (no PMI for 90% LTV). I still need a few months before I would be able to refi at 80% LTV for the PenFed loan.
Forgot to comment about rate.

Yes, likewise, I'm also surprised we're seeing 2.875% TODAY. And if anyone missed the 2.875% boat back then, here's another one. I have no idea how they can offer this rate in today's environment compared to last April. :)
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by Khanmots »

cflannagan wrote:As long as one understands this is an ARM and is okay with rate increasing up by 2% every 5 years, yes, go for it. I refi'd with 5/5 ARM with Penfed last April, at 2.875%.

Even if it increases by max of 2% 5 years later, it would still be under my former rate of 5.5%. So, that's at least 10 years of sub-5.5% rate. Can't beat that.

The best thing: they truly pay 100% of your closing costs. Literally. THey pay for assessment, title insurance, fees, etc.. you only need to bring prepaid interest and principal, which would have been your cost anyway. The "closing costs" they covered for me totaled $5,900+.

Caveat: If I refi or pay off this loan less than 36 months, I have to pay back $5,900. Which I'm perfectly fine with.
It's worth noting that the math is a bit complex on what the break-even rate is since the earlier rates have a disproportionate impact (that whole compounding thing ;) )

For instance, if you were on a 10-year payoff schedule on a fixed 3.4% note, you would come out slightly ahead with the 5/5 ARM mentioned here (assuming you're paying at the same 10-year payoff rate), even assuming a max 2% rate increase to 4.875% at the 5 year mark.

As for PenFed, I had the same experience, it truly was 100% of closing costs covered. That said, I did have to babysit them some and there were some mistakes in the paperwork that needed correction. But after everything was signed it's been smooth sailing and I didn't feel like anyone was trying to mislead me. I'd use them again.

And yes, 2.875% today surprises me too!
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by SHB »

[OT comments removed by admin LadyGeek]
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by Watty »

The APR is now 3.44% so and the number they give for the next 300 months is 3.750% so it looks like the first five years is at a bit of teaser rate. I don't recall the differences being so large when I refinance with it almost two years ago, in fact the APR might have been a bit less than then the interest rate then if I remember right.

FYI, Not that it makes much difference but when I did the refinace there was about $150 that I did have to pay for some local fee or tax that was not in their list of fees that they would pay. I did not do an escrow account so it was not related to that.

One thing that I did not like about that loan is that they are vague about just what index the interest rate is linked to and what index they will use in the future. I plan to have my loan paid off about seven years after I got it so it does not make much difference to me but you should know what you are getting into if you get that loan.
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by cflannagan »

Watty wrote:The APR is now 3.44% so and the number they give for the next 300 months is 3.750% so it looks like the first five years is at a bit of teaser rate. I don't recall the differences being so large when I refinance with it almost two years ago, in fact the APR might have been a bit less than then the interest rate then if I remember right.

FYI, Not that it makes much difference but when I did the refinace there was about $150 that I did have to pay for some local fee or tax that was not in their list of fees that they would pay. I did not do an escrow account so it was not related to that.

One thing that I did not like about that loan is that they are vague about just what index the interest rate is linked to and what index they will use in the future. I plan to have my loan paid off about seven years after I got it so it does not make much difference to me but you should know what you are getting into if you get that loan.
If you use terms such as "teaser rate" to describe rate for first 5 years for 5/5 ARMs then I'm not sure you know what ARMs are.

Assuredly, like others have mentioned in this thread, it was zero-closing-cost deal for us. You ought to clarify what the $150 was for.. "fee or tax".. too vague and doesn't sound like you are even sure of anything.

As for being vague as to which index the interest rate is based on, yes unfortunate. For me it's still a win because for first 10 years of my loan, it's going to be lower than what my rate was (5.5%) before the refi. I will be striving to pay down principal as much as possible so that I'm paying lesser interest than I would have had I stayed with the 5.5% loan.

I'm sorry to hear that your experience is perhaps "not as good" as the others, but I think that would tend to be an exception rather than the usual.

Edit:

No, the rate's still 2.875%, see image:

Image

The 3.44% probably is the average interest rate over lifetime of the 5/5 ARM loan, using example shown.

In reality, it can be higher, because the interest rate is adjusted every 5 years. Here is the worst case:

First 5 years: 2.875%
Next 5 years: 4.875% (terms say can increase only by max of 2%)
Next 5 years: 6.875% (again, another 2% max)
Last 15 years: 7.875% (capped at 5% over initial rate, as per terms)

We knew this when we signed up for the 5/5 ARM.
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StealthWealth
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by StealthWealth »

This surprised me also. I locked in 3.25% a week or so ago and thought that was pretty good. I take it there is probably no way to take advantage of this drop at this point?
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by pteam »

I think you guys should also look at www.ThirdFederal.com if your in a state they service. Current 5/1 arms are 2.79% plus closing costs or 3.1% with only $495 closing costs. They have other plans like a 5/1 10 year payment plan at 2.44%.

The best thing about them is after you have the mortgage with them you can pay $495 and relock in their current rate without having todo a whole refi and it resets the 5 year term. I did this with them at the bottom and got a 5/1 30 yr payment term at 2.35%!
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by BrandonBogle »

pteam wrote:I think you guys should also look at http://www.ThirdFederal.com if your in a state they service. Current 5/1 arms are 2.79% plus closing costs or 3.1% with only $495 closing costs. They have other plans like a 5/1 10 year payment plan at 2.44%.

The best thing about them is after you have the mortgage with them you can pay $495 and relock in their current rate without having todo a whole refi and it resets the 5 year term. I did this with them at the bottom and got a 5/1 30 yr payment term at 2.35%!
Always an option, but risky if they every take away the rate adjustment WITH reset option. PenFed for long would reset the 5/5 term when you did a rate adjustment at 1% of outstanding principle. They took away this option about a year ago. Long story short, a rate adjustment is NOT guaranteed to always be there and NOT guaranteed to always reset your 5 year term. Not saying to not take such a rate, but it's gamble that you could do the resets along the way vs. being guaranteed the new rate would be in effect for 5 years.
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by pteam »

BrandonBogle wrote:
pteam wrote:I think you guys should also look at http://www.ThirdFederal.com if your in a state they service. Current 5/1 arms are 2.79% plus closing costs or 3.1% with only $495 closing costs. They have other plans like a 5/1 10 year payment plan at 2.44%.

The best thing about them is after you have the mortgage with them you can pay $495 and relock in their current rate without having todo a whole refi and it resets the 5 year term. I did this with them at the bottom and got a 5/1 30 yr payment term at 2.35%!
Always an option, but risky if they every take away the rate adjustment WITH reset option. PenFed for long would reset the 5/5 term when you did a rate adjustment at 1% of outstanding principle. They took away this option about a year ago. Long story short, a rate adjustment is NOT guaranteed to always be there and NOT guaranteed to always reset your 5 year term. Not saying to not take such a rate, but it's gamble that you could do the resets along the way vs. being guaranteed the new rate would be in effect for 5 years.
I agree. The reset option is just a bonus in addition to the super low rates.
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by grok87 »

I agree that they are a little vague about how the indexing works. Here's the deal- it is the 5 year Constant Maturity Treasury + a margin of 2%. You can see the 5 year CMT, with a lag, here
http://www.federalreserve.gov/releases/h15/data.htm

The 5 year CMT apparently was at 1.75% this morning when they updated the published rate on their website- hence the 3.75% rate assumption for the years beyond the first 5 years.

I think the comment that the gap between the 2.875% and the 3.75% looks somewhat larger than usual is accurate. Here is my assessment of what is going on:

1) The housing market is slowing down. Purchases are slowing and refinances are way down.

2) Banks and credit unions have a lot of spare loan capacity that they are anxious to deploy. So they may be getting a little aggressive. PenFed is doing this by dropping the initial 5 year teaser rate lower than they normally would. Their normal practice would probably be to put it at about 3.25%. But they figure a rate below 3% looks good.

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Re: PenFed 5/5 ARM at 2.875%??!!

Post by Tamahome »

For those that have or know more details about this mortgage, does it allow for prepayment or is there a penalty for prepayment? I know you cannot prepay within 36 months, but if one were to pay it off at year 9, is there a problem with that under this loan?
I'm not a financial professional. Post is info only & not legal advice. No attorney-client relationship exists with reader. Scrutinize my ideas as if you spoke with a guy at a bar. I may be wrong.
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by cflannagan »

Dulocracy wrote:For those that have or know more details about this mortgage, does it allow for prepayment or is there a penalty for prepayment? I know you cannot prepay within 36 months, but if one were to pay it off at year 9, is there a problem with that under this loan?
To my knowledge, there's no prepayment penalty after year 3 (I have all the docs here, nothing seems to indicate anything beyond year 3 prepayment).

You could, if you wanted, pay off everything on month 37 without penalty.

I assume this means Penfed has made profit within 36 months, even if they paid for your closing costs, and have no qualm about you paying everything off after month 36.
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by BrandonBogle »

As a side note, your can prepay during the first 36 months -- you just cannot prepay so much that your loan is paid off until month 37.
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by lospecv »

does anyone know how the 1yr libor rate moves? It really has not moved much in the past few years.

I got a 5 year arm from navy federal CU back in '05 and has been resetting every DEC for the last few years. Its tied to the 1yr libor rate. I have not done a refi cuz my rate has been 3% for the last 3 or 4 years where before i had a 4.75% for the first 5 years. So, i plan on keeping it as long as it stays this way :twisted:
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by BrandonBogle »

lospecv wrote:does anyone know how the 1yr libor rate moves? It really has not moved much in the past few years.

I got a 5 year arm from navy federal CU back in '05 and has been resetting every DEC for the last few years. Its tied to the 1yr libor rate. I have not done a refi cuz my rate has been 3% for the last 3 or 4 years where before i had a 4.75% for the first 5 years. So, i plan on keeping it as long as it stays this way :twisted:
A no-cost refi to a 5/5 ARM (or even another 5/1 ARM) could be worthwhile to you to lock in this rate. But sadly, I do not know how the 1 year LIBOR rate moves. Sorry.
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by Ketawa »

The rate is now down to 2.75%! This would save me about $500 a year. I think it might be time to see if I can stretch myself a little to refinance.
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by Meg77 »

Yep I saw this today - 2.75%! I am shopping for a new home and really hope we find something before this rate bounces back up. Does anybody know if they will give you a second mortgage behind the first one? I see in the fine print that they allow Combined Loan To Values up to 95%, but it doesn't mention them actually offering second purchase mortgages. My fiance and I were planning to do an 80-10-10 loan with a traditional bank (an 80% standard purchase mortgage with a 10% second mortgage behind it and a 10% down payment).
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by StealthWealth »

Wow, the difference between the 3.25% I locked in and will be closing next week and 2.75% would reduce the payment by about $70/month. I wonder if after closing I could apply to refinance and then pay the closing cost penalty for paying off the previous loan in less than 36 months? Viable?

Probably not worth it and I should just be happy with the 3.25% and a plan to pay it off in 10 years before the second reset.


Edit: Got my answer from the fine print - "5/5 Adjustable Rate Mortgage (ARM) Closing Cost Promotion: Offer available for purchases or external refinances only. "
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by sjt2 »

I locked with Pen Fed about 3 weeks back on my name.

I talked to them and they say they cannot relock to the current 2.75% rate. My closing is end of next month.

Any ideas?
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by sjt2 »

I locked with Pen fed few weeks back for 3.25%.

Talked to them and they said I need to wait 90 days for this.

[(removed) --admin LadyGeek]...that would have been a saving of about $7000 for the first 5 years for me..
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by cflannagan »

StealthWealth wrote:Edit: Got my answer from the fine print - "5/5 Adjustable Rate Mortgage (ARM) Closing Cost Promotion: Offer available for purchases or external refinances only. "
They sure think of everything don't they? ;)

I'm not sure it's a good idea to do what you suggested still.. but of course it depends on total closing costs. In my case, it was $5,900 (which Penfed covered of course). At $70 a month, that was take me 84 months to recoup or 7 years. Kinda long time to recoup the additional cost IMHO.
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by runner9 »

As an aside, I believe the 36 month penalty was added several months ago? We closed August 29, 2012 and I'm almost positive you couldn't payoff in less than 24 months at the time. I'll need to double check soon as we're on track to be done in about 28 months:)
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by Lainey »

Most of the other mortgage loans have a 1% origination fee. But this one appears not to have that. Is that part of the closing costs PenFed pays? Thanks.
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by grok87 »

I'm pretty sure you can pay off the loan before the 24 months or 36 months or whatever. You just have to repay prorata the closing costs that they paid for you.
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by BrandonBogle »

Lainey wrote:Most of the other mortgage loans have a 1% origination fee. But this one appears not to have that. Is that part of the closing costs PenFed pays? Thanks.
PenFed ARMs do not have an origination fee. It is not part of the closing costs to be repaid.
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by BrandonBogle »

grok87 wrote:I'm pretty sure you can pay off the loan before the 24 months or 36 months or whatever. You just have to repay prorata the closing costs that they paid for you.
True. But recently they increased from 24 months to 36 months. So some loans can refi at 24 months without penalty. I do not recall if this happened early in 2013 or mid-late 2012 though.
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by MoneyDummy »

Ketawa wrote:The rate is now down to 2.75%! This would save me about $500 a year. I think it might be time to see if I can stretch myself a little to refinance.
Sorry, as I haven't been watching mortgage rates until now, but have rates been as low as this for a 5/5 ARM over the past year?

I have a 5/1 ARM I/O loan @ 2% that is going to change rates in April 2014. I really wish I could tell the future and figure out the best time to refi. Clock is ticking...
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by sjt2 »

Guys one more question.

What if I abandon the current application and apply the loan on my wife's name? And probably add myself after initial application.
They haven't really started anything. Worst case, have to pay for the appraisal

Do you think that will work?
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by sjt2 »

MoneyDummy wrote:
Ketawa wrote:The rate is now down to 2.75%! This would save me about $500 a year. I think it might be time to see if I can stretch myself a little to refinance.
Sorry, as I haven't been watching mortgage rates until now, but have rates been as low as this for a 5/5 ARM over the past year?

I have a 5/1 ARM I/O loan @ 2% that is going to change rates in April 2014. I really wish I could tell the future and figure out the best time to refi. Clock is ticking...
Do you have your loan with PenFed?

Anyways the rates won't go higher. With the economic situation in the country, I don't think rates will go much higher. Fed will stop bond buying but if you see the 30 year fixed rates are about 4.5 to 5% range. Last time when I closed my existing home, the rates were in the 6% range back in 2007 when the market was really good and high. I don't expect the housing market will be that great as that of 2007 levels but bottom line is the rates may not go real high. At least that is what I think.
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by grok87 »

sjt2 wrote:
MoneyDummy wrote:
Ketawa wrote:The rate is now down to 2.75%! This would save me about $500 a year. I think it might be time to see if I can stretch myself a little to refinance.
Sorry, as I haven't been watching mortgage rates until now, but have rates been as low as this for a 5/5 ARM over the past year?

I have a 5/1 ARM I/O loan @ 2% that is going to change rates in April 2014. I really wish I could tell the future and figure out the best time to refi. Clock is ticking...
Do you have your loan with PenFed?

Anyways the rates won't go higher. With the economic situation in the country, I don't think rates will go much higher. Fed will stop bond buying but if you see the 30 year fixed rates are about 4.5 to 5% range. Last time when I closed my existing home, the rates were in the 6% range back in 2007 when the market was really good and high. I don't expect the housing market will be that great as that of 2007 levels but bottom line is the rates may not go real high. At least that is what I think.
+1
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by abuss368 »

How are rates this volatile?
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by StealthWealth »

Fine print also says:

Internal PenFed Loan Refinances: Borrowers with an existing 5/5 ARM PenFed mortgage may qualify to do a rate modification for a 1% fee of the loan payoff amount. Borrowers with existing PenFed Mortgages may also become eligible to refinance if the following criteria is met.

1. New loan amount must be $50K over payoff on a conforming loan and $100K over payoff on a jumbo or super jumbo loan.


I am going to let mine close next week and then if it happens to drop to 2.5%, try to pay thr 1% fee and do a rate adjustment. That would have a payback of about 20 months with a plan to pay off in 120. That is my thoughts currently but subje t to change!
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by sesq »

BrandonBogle wrote:
grok87 wrote:I'm pretty sure you can pay off the loan before the 24 months or 36 months or whatever. You just have to repay prorata the closing costs that they paid for you.
True. But recently they increased from 24 months to 36 months. So some loans can refi at 24 months without penalty. I do not recall if this happened early in 2013 or mid-late 2012 though.
The 36 month closing cost clawback was added in Feb 2013. You can see discussion of it in the FWF thread. I applied on 1/25/13 (2.625%), and may be in a position to pay it off next year. I need to pull my paperwork out and see if there was a 24 month clawback in my terms. Worst case the rate is so low I don't *need* to pay it off (or substantially pay it off if I need to let a few months tick off). But I kind of want to be done with it.
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by cflannagan »

abuss368 wrote:How are rates this volatile?
Volatile in relative to what?

Rates has always went up, down, up, down.. it fluctuates.
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by archbish99 »

pteam wrote:I think you guys should also look at http://www.ThirdFederal.com if your in a state they service. Current 5/1 arms are 2.79% plus closing costs or 3.1% with only $495 closing costs. They have other plans like a 5/1 10 year payment plan at 2.44%.

The best thing about them is after you have the mortgage with them you can pay $495 and relock in their current rate without having todo a whole refi and it resets the 5 year term. I did this with them at the bottom and got a 5/1 30 yr payment term at 2.35%!
Yeah, but there's a vast difference between a 5/5 and a 5/1 ARM. Even a 7/1 ARM I wouldn't touch with a ten-foot pole if I thought it was even possible we'd stay in the house long term. Let's say it has the same rate caps as PenFed (and PenFed also appears to be comparatively generous there), and they're 2/2/5:

Code: Select all

Years               PenFed           ThirdFed
1-5                 2.75%            2.79%
6                   4.75%            4.79%
7                   4.75%            6.79%
8-9                 4.75%            7.79%
10-15               6.75%            7.79%
16+                 7.75%            7.79%
The attraction of a 5/5 is the slow change even once it begins adjusting. It takes 15 years to reach maximum, whereas many x/1 ARMs can go to maximum in 1-2 years after the initial lock rate.
I'm not a financial advisor, I just play one on the Internet.
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BrandonBogle
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by BrandonBogle »

Archbish, this has always been the case with PenFed's 5/5 ARM. Unless you are absolutely sure you to be done within 1 year of the initial term, it is a MUCH less risky loan (in terms of rates skyrocketing). Even better for older users. I had one many years ago on a previous house. That one had the same index, but a margin of 1%. It actually reset LOWER than the then-current initial rate.
mmmarlowe
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by mmmarlowe »

To get this loan, can you just apply online or do you first need to become a member of PenFed and then apply? I have a 10 year fixed loan with 3.75 APR with just over 7 years remaining to be paid off. Based on the discussions here, in the worst case scenario (2% increase in 5 years to 4.75%), this loan still looks like a good option for me. I am not looking to reduce the payment term. I would pay as if the loan were for 7 years and bank/invest the savings.
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BrandonBogle
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by BrandonBogle »

mmmarlowe wrote:To get this loan, can you just apply online or do you first need to become a member of PenFed and then apply? I have a 10 year fixed loan with 3.75 APR with just over 7 years remaining to be paid off. Based on the discussions here, in the worst case scenario (2% increase in 5 years to 4.75%), this loan still looks like a good option for me. I am not looking to reduce the payment term. I would pay as if the loan were for 7 years and bank/invest the savings.
Go to https://www.penfed.org/55-Adjustable-Rate-Mortgage/ . You likely will get the answer to which you seek.
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Watty
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by Watty »

mmmarlowe wrote:To get this loan, can you just apply online or do you first need to become a member of PenFed and then apply? I have a 10 year fixed loan with 3.75 APR with just over 7 years remaining to be paid off. Based on the discussions here, in the worst case scenario (2% increase in 5 years to 4.75%), this loan still looks like a good option for me. I am not looking to reduce the payment term. I would pay as if the loan were for 7 years and bank/invest the savings.
About two years ago when I got my 5/5 mortgage you could join PenFed as one of the first steps in the loan application process. If you don't otherwise qualify you can give a one time donation of about $20 by credit card to a related organization to qualify for PenFed membership. I think you also had to put $5.00 into your new PenFed Account at that time. As I recall if you are a blood donor to the Red Cross that qualifies you as a material supporter of Red Cross and allow you to join without donating the $20.

My plans are very similar to yours with planning to get my mortgage paid off in about seven years. With such a short time doing a refinance that cost anything didn't make sense and the no cost ones didn't work for me since my mortgage amount was relatively low.

One nice thing is that the mortgage is amortized over 30 years so if you get laid off or something you can reduce your mortgage payment or if interest rates soar above the mortgage interest rate then you can reduce your payments and invest the money elsewhere.
thomasbayarea
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by thomasbayarea »

2.75% today.
mikep
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by mikep »

I am trying to refer a friend to them that has a condo. What is the max LTV for a condo from Penfed? I see in the fine print on the 5/5 ARM page they will go up to 80%, then I click "get started" to go in and apply, on the left sidebar FAQ it says "are you purchasing or refinancing a condo?" then it says there they will only go up to 70% on a condo for all mortgages. Is there something special on the 5/5 ARM that they will go to 80% or is this just a big misprint?

He may be on the borderline between 70-80%. I want to recommend Penfed to him, however conflicting information on their website gives me pause.
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Ketawa
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by Ketawa »

Could it be because of the number of stories in the building? During the application process, you are asked if there are < or <= four stories (can't remember which). My building has three stories and I have had no trouble so far with applying for the 5/5 ARM refinancing at 80% LTV.

Edit: I found the FAQ question you were wondering about. The information it gives is clearly incorrect; you might need to call PenFed for an answer.
sjt2
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by sjt2 »

Anyone knows what is the penalty of withdrawing from PenFed loan that I already started?

As the rates came down, I want to apply on my spouse's name.

Anyone know if they can close in a month?

Thanks in advance!!!
mikep
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by mikep »

Ketawa wrote:Could it be because of the number of stories in the building? During the application process, you are asked if there are < or <= four stories (can't remember which). My building has three stories and I have had no trouble so far with applying for the 5/5 ARM refinancing at 80% LTV.

Edit: I found the FAQ question you were wondering about. The information it gives is clearly incorrect; you might need to call PenFed for an answer.

I emailed Penfed.. when I get a response I will post what they say. He just has 2 story condo (upstairs/downstairs) .. no second floor entry or anything.
EDIT : Do you have a condo that they are giving 80% LTV for the application?
Thanks.
Last edited by mikep on Wed Sep 25, 2013 11:52 am, edited 2 times in total.
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Ketawa
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by Ketawa »

sjt2 wrote:Anyone knows what is the penalty of withdrawing from PenFed loan that I already started?

As the rates came down, I want to apply on my spouse's name.

Anyone know if they can close in a month?

Thanks in advance!!!
If you withdraw, you are responsible for all closing costs that have been incurred.

They probably can't close in a month. At least, they warned me that they wouldn't be able to when I was applying. Why not call them to ask?

You're betting on rates coming down more? The loan is already at 2.75%, when a 5/5 ARM from someplace like NFCU is 3.25%. They are typically within .125% of each other.
sjt2
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by sjt2 »

If you withdraw, you are responsible for all closing costs that have been incurred.

They probably can't close in a month. At least, they warned me that they wouldn't be able to when I was applying. Why not call them to ask?

You're betting on rates coming down more? The loan is already at 2.75%, when a 5/5 ARM from someplace like NFCU is 3.25%. They are typically within .125% of each other.
Thanks for the reply.
Actually I didn't close the loan yet. I locked it around 3.25% about 3 weeks back. When I emailed them (tough to reach on phone), they say that the loan is on the House Address and the rate would be the same. When I applied, I applied on my name with no reference to my wife's name except on the contract. So all the info they have is mine (SSN. paystubs etc).

Again this is a new construction. No. I am not betting on coming down more. My point was 3.25 to 2.75 is a significant drop that I can do something about it.

Thanks!
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Meg77
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Re: PenFed 5/5 ARM at 2.875%??!!

Post by Meg77 »

This is from the find print on the 5/5 ARM from the penfed website https://www.penfed.org/55-Adjustable-Ra ... r-04152013 &WT.ac=1021
Investment properties not eligible for offers.

Conforming Mortgages: For loan amounts from $25,000 to $417,000. The maximum combined loan- to-value (CLTV) is 95%; 80% LTV and above are subject to private mortgage insurance (PMI). The maximum LTV and CLTV for condominiums is 80%.

Jumbo Mortgages: For loan amounts above $417,000 to $750,000. The maximum loan-to-value (LTV) is 80% and the maximum combined loan-to-value (CLTV) is 90%. The maximum LTV and CLTV for condominiums is 80%.

Super Jumbo Mortgages: For loan amounts above $750,000. 5/5 ARMs up to $4 million and Fixed Loans up to $2 million. The maximum loan-to-value (LTV) and combined loan-to-value (CLTV) is 80%. The maximum LTV and CLTV for condominiums is 70%.

5/5 ARMs – Offers available for purchases or external refinances only. The initial rate can change every 5 years by no more than 2 percentage points up or down, never to exceed 5 percentage points above the initial rate. When the rate adjusts, your new rate will be the then current index plus margin, which is currently set to 2.00 for the new products, as long as it does not exceed the 2% adjustment cap.

All Mortgage Programs: The application of discount points will be determined by the loan-to- value (LTV) ratio combined with certain representative credit scores. Points also apply to certain cash-out refinance transactions, certain condominium transactions, and some transactions with subordinate financing.
Looks like they go up to 80% on condos on conforming and jumbo loan sizes. On a super jumbo the limit is 70%.
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