Interest Only Mortgage

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Topic Author
Count of Notre Dame
Posts: 255
Joined: Fri Oct 11, 2013 1:08 pm

Interest Only Mortgage

Post by Count of Notre Dame »

I am considering modifying my 10/1 ARM to an interest only mortgage and maintaining the same interest rate (2.75%). If you could modify your existing mortgage to an interest only mortgage, would you? Assuming you can make the principal payments on the traditional loan.
BlueCable
Posts: 372
Joined: Fri Jun 17, 2016 9:20 am

Re: Interest Only Mortgage

Post by BlueCable »

I would but my wife would not agree to it.
lucky_tech_guy
Posts: 58
Joined: Tue Dec 19, 2017 9:46 am

Re: Interest Only Mortgage

Post by lucky_tech_guy »

I already did.
Topic Author
Count of Notre Dame
Posts: 255
Joined: Fri Oct 11, 2013 1:08 pm

Re: Interest Only Mortgage

Post by Count of Notre Dame »

lucky_tech_guy wrote: Thu Jan 07, 2021 1:05 pm I already did.
What has been your plan for the extra cash flow?
lucky_tech_guy
Posts: 58
Joined: Tue Dec 19, 2017 9:46 am

Re: Interest Only Mortgage

Post by lucky_tech_guy »

I get paid mostly in RSUs so I'm hoping to sell less and not take the capital gains hits. So basically just invest it.

Count of Notre Dame wrote: Thu Jan 07, 2021 3:43 pm
lucky_tech_guy wrote: Thu Jan 07, 2021 1:05 pm I already did.
What has been your plan for the extra cash flow?
KlangFool
Posts: 18989
Joined: Sat Oct 11, 2008 12:35 pm

Re: Interest Only Mortgage

Post by KlangFool »

OP,


It makes sense if you have a non-recourse loan. You can only lose the house if you walk away from the mortgage.


KlangFool
CurlyDave
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Joined: Thu Jul 28, 2016 11:37 am

Re: Interest Only Mortgage

Post by CurlyDave »

lucky_tech_guy wrote: Sun Jan 10, 2021 12:27 pm ...I get paid mostly in RSUs so I'm hoping to sell less and not take the capital gains hits. So basically just invest it.

I think you will soon have any awful lot of your net worth tied up in the company you work for. In good times this can be quite beneficial, but when the going gets rough you may wish that you had been more diversified.
Topic Author
Count of Notre Dame
Posts: 255
Joined: Fri Oct 11, 2013 1:08 pm

Re: Interest Only Mortgage

Post by Count of Notre Dame »

KlangFool wrote: Sun Jan 10, 2021 12:29 pm OP,


It makes sense if you have a non-recourse loan. You can only lose the house if you walk away from the mortgage.


KlangFool
Thanks Klang!
KlangFool
Posts: 18989
Joined: Sat Oct 11, 2008 12:35 pm

Re: Interest Only Mortgage

Post by KlangFool »

Count of Notre Dame wrote: Sun Jan 10, 2021 1:09 pm
KlangFool wrote: Sun Jan 10, 2021 12:29 pm OP,


It makes sense if you have a non-recourse loan. You can only lose the house if you walk away from the mortgage.


KlangFool
Thanks Klang!
Count of Notre Dame,

Do you plan to take out all the home equities in the house? Then, you can walk away from the house and lose nothing.


KlangFool
lakpr
Posts: 6697
Joined: Fri Mar 18, 2011 9:59 am

Re: Interest Only Mortgage

Post by lakpr »

KlangFool wrote: Sun Jan 10, 2021 1:15 pm
Count of Notre Dame wrote: Sun Jan 10, 2021 1:09 pm
KlangFool wrote: Sun Jan 10, 2021 12:29 pm OP,


It makes sense if you have a non-recourse loan. You can only lose the house if you walk away from the mortgage.


KlangFool
Thanks Klang!
Count of Notre Dame,

Do you plan to take out all the home equities in the house? Then, you can walk away from the house and lose nothing.


KlangFool
Even in California where non-recourse loans are a thing, only primary mortgages are non-recourse. Home equity loans are never non-recourse, the lender can continue to pursue you, unless you declare bankruptcy and include the HEL lender in the bankruptcy petition. Even the primary mortgages aren't non-recourse, if refinanced.
Tingting1013
Posts: 688
Joined: Mon Aug 24, 2020 5:44 pm

Re: Interest Only Mortgage

Post by Tingting1013 »

lakpr wrote: Sun Jan 10, 2021 3:27 pm Even the primary mortgages aren't non-recourse, if refinanced.
Incorrect.

https://www.weltman.com/publication-the ... cy-balance
A state with one of the most stringent anti-deficiency laws is California. California CCP § 580b(3) states that no deficiency judgment shall lie under a deed of trust or mortgage on a dwelling for not more than four families given to a lender to secure repayment of a loan which was in fact used to pay all or part of the purchase price of that dwelling, occupied entirely or in part by the purchaser. Simply put, there can be no deficiency judgment after foreclosing on a “purchase-money loan” that was obtained for the purpose of purchasing the property. It does not matter if it’s a first, second, or third mortgage, or whether it was a home equity line of credit. If the borrower obtained the loan and granted a mortgage to the lender to secure all or part of the purchase price, no deficiency is permitted after foreclosure.

Moreover, CCP § 580 was recently amended by the California legislature to include refinances of a purchase-money loan as exempt from deficiency. § 580c states that no deficiency judgment shall lie in any event on any loan, refinance, or other credit transaction which is used to refinance a purchase money loan, or subsequent refinances to a purchase money loan, except to the extent that the lender advances new principal which is not applied to the balance on the purchase money loan. Refinances were generally excluded from the Anti-Deficiency Law prior to the 2012 amendment.
Topic Author
Count of Notre Dame
Posts: 255
Joined: Fri Oct 11, 2013 1:08 pm

Re: Interest Only Mortgage

Post by Count of Notre Dame »

KlangFool wrote: Sun Jan 10, 2021 1:15 pm
Count of Notre Dame wrote: Sun Jan 10, 2021 1:09 pm
KlangFool wrote: Sun Jan 10, 2021 12:29 pm OP,


It makes sense if you have a non-recourse loan. You can only lose the house if you walk away from the mortgage.


KlangFool
Thanks Klang!
Count of Notre Dame,

Do you plan to take out all the home equities in the house? Then, you can walk away from the house and lose nothing.


KlangFool
I don't plan to cash out and I'm actually doing a loan modification, not a refinance, so my payoff period (~28 years remaining) will be the same.
KlangFool
Posts: 18989
Joined: Sat Oct 11, 2008 12:35 pm

Re: Interest Only Mortgage

Post by KlangFool »

Count of Notre Dame wrote: Mon Jan 11, 2021 3:02 pm
KlangFool wrote: Sun Jan 10, 2021 1:15 pm
Count of Notre Dame wrote: Sun Jan 10, 2021 1:09 pm
KlangFool wrote: Sun Jan 10, 2021 12:29 pm OP,


It makes sense if you have a non-recourse loan. You can only lose the house if you walk away from the mortgage.


KlangFool
Thanks Klang!
Count of Notre Dame,

Do you plan to take out all the home equities in the house? Then, you can walk away from the house and lose nothing.


KlangFool
I don't plan to cash out and I'm actually doing a loan modification, not a refinance, so my payoff period (~28 years remaining) will be the same.
Count of Notre Dame,

My question to you would be why not? It will lower your exposure to the house.

KlangFool
lucky_tech_guy
Posts: 58
Joined: Tue Dec 19, 2017 9:46 am

Re: Interest Only Mortgage

Post by lucky_tech_guy »

I made the mistake to diversify 2 years ago and now I'm short $8M that I could have had.

CurlyDave wrote: Sun Jan 10, 2021 12:33 pm
lucky_tech_guy wrote: Sun Jan 10, 2021 12:27 pm ...I get paid mostly in RSUs so I'm hoping to sell less and not take the capital gains hits. So basically just invest it.

I think you will soon have any awful lot of your net worth tied up in the company you work for. In good times this can be quite beneficial, but when the going gets rough you may wish that you had been more diversified.
ScubaHogg
Posts: 761
Joined: Sun Nov 06, 2011 3:02 pm

Re: Interest Only Mortgage

Post by ScubaHogg »

lucky_tech_guy wrote: Thu Jan 07, 2021 1:05 pm I already did.
Mind saying which bank?
“Unexpected Returns dominate the Expected Returns” - Ken French
lucky_tech_guy
Posts: 58
Joined: Tue Dec 19, 2017 9:46 am

Re: Interest Only Mortgage

Post by lucky_tech_guy »

Bank of America. I can send contact info if you want, he was great to deal with.
ScubaHogg wrote: Wed Jan 13, 2021 11:53 am
lucky_tech_guy wrote: Thu Jan 07, 2021 1:05 pm I already did.
Mind saying which bank?
ScubaHogg
Posts: 761
Joined: Sun Nov 06, 2011 3:02 pm

Re: Interest Only Mortgage

Post by ScubaHogg »

lucky_tech_guy wrote: Wed Jan 13, 2021 11:58 am Bank of America. I can send contact info if you want, he was great to deal with.
ScubaHogg wrote: Wed Jan 13, 2021 11:53 am
lucky_tech_guy wrote: Thu Jan 07, 2021 1:05 pm I already did.
Mind saying which bank?
Yes please. Thank you. Feel free to PM
“Unexpected Returns dominate the Expected Returns” - Ken French
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