Search found 2 matches

by Hedley Lamarr
Fri Jun 28, 2013 7:48 pm
Forum: Personal Finance (Not Investing)
Topic: Mortgage Buy-Back (Not Payoff)
Replies: 2
Views: 551

Re: Mortgage Buy-Back (Not Payoff)

Thanks, that explains it.
by Hedley Lamarr
Fri Jun 28, 2013 5:21 pm
Forum: Personal Finance (Not Investing)
Topic: Mortgage Buy-Back (Not Payoff)
Replies: 2
Views: 551

Mortgage Buy-Back (Not Payoff)

As a twist on the typical prepay mortgage v. invest threads, I have been thinking about the following scenario. From the bank’s perspective, a mortgage is similar to a bond. I understand that it is not quite the same as a traditional bond because each payment is both interest and principal, and the interest is front-loaded. Thus, the yields are calculated differently. But for both, if interest rates rise over the next few years, the price for which the bank can sell existing, lower rate mortgages should decline. If that is correct, at some point the bank should be willing to allow a borrower to repurchase the mortgage at a cost below the payoff amount. Here is an example: Assume a 15-year mortgage for $100,000 financed at 2.5%. At the end o...