I have written about many success stories that are happening daily in this unique mortgage market. With an inverted yield curve, or one very close to inverted, you can accomplish things that wouldn't work in a normal financial climate. This story totally illustrates what can be accomplished.
An old friend from college days, we both now get senior passes at the movies, called and said he was in a bit of financial distress and needed some cash. I reviewed his credit report and found that since I had put him into a mortgage, 4.875% on a 5-year arm about 2.5 years ago, he had run up approximately $125,000 in miscellaneous debts. (I had nothing to do with that). The first mortgage was very attractive but didn't lend itself to the solution. The solution was a 15 year fixed for the entire debt -- $625,000 in the low 6% range. I also added $20,000 in cash for reserves so he wouldn't get right back into the credit card world again. Even after paying off his debts, giving him some cash and lowering his amortization from 30 years to 15 years I was still saving him $775 per month. Of course, the big savings is cutting 12.5 years off of his mortgage.
Over the next 5 years he will save $46,500 in monthly payments and the entire $145,000 will have disappeared through the amortization of his mortgage. Even if he had not refinanced and somehow paid off the debts in 5 years, leaving him with the same balance he would have if he had refinanced, he would still have 22.5 years to go, not 10 years.
Sometimes the obvious is not so obvious.
Call us, Manhattan West at 949- 5553 or write to me on the web @MortgageMinuteGuy.com. You will be happy that you did.