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Posted
1 minute ago, Surly Bevo said:

I mean he could not report it and not pay and roll the dice that the IRS is so gutted they won’t notice

You will get a 1099-s on the proceeds from the sale of a home... so don't do that.

 

Back to the 1031 topic.  If you have the wherewithal and time you can make the primary residence a "rental" and then 1031 exchange it.  Articles on the topic suggest a two year timeline.  No idea how much the IRS will care about your effectiveness at renting the property over that timeline.

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Posted
On 5/8/2025 at 8:33 AM, Im_smarter_then_you said:

Is there a way of not paying cap gains tax after selling a house?

I wish I knew when I was young about the 2 out of the last 5 year Homestead cap gain exclusion.  Buy a fixer upper, fix it, refi to get cash back out, then rent it.  Move into new homestead, that you remodel.  Then sell first place, before, and refi the newly improved homestead.  The 5 year clock starts ticking again on the second homestead.  BUT you can only take the exemption once every 5 years.  

Where else can a married couple pick up that sort of tax free income?  No place.

But past $500,000 you are paying cap gains.  Unless you roll all the non-excluded gain into a new homestead. Then there is no gain since that gain got rolled into the new homestead.

 

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Posted
28 minutes ago, horn4life said:

I wish I knew when I was young about the 2 out of the last 5 year Homestead cap gain exclusion.  Buy a fixer upper, fix it, refi to get cash back out, then rent it.  Move into new homestead, that you remodel.  Then sell first place, before, and refi the newly improved homestead.  The 5 year clock starts ticking again on the second homestead.  BUT you can only take the exemption once every 5 years.  

Where else can a married couple pick up that sort of tax free income?  No place.

But past $500,000 you are paying cap gains.  Unless you roll all the non-excluded gain into a new homestead. Then there is no gain since that gain got rolled into the new homestead.

 

The end of this is incorrect.  You pay capital gains on the excess difference being the exclusion amount.

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Posted
59 minutes ago, Hefeweizen said:

The end of this is incorrect.  You pay capital gains on the excess difference being the exclusion amount.

This and also bone comment below. 

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Posted
5 hours ago, Hefeweizen said:

The end of this is incorrect.  You pay capital gains on the excess difference being the exclusion amount.

So if I buy my homestead for $500K and via appreciation it becomes worth $1.2 million. I cannot then sell the place for $1.2 million, buy a new homestead for $700K million and pocket the $500K exclusion? 

I thought as long as you put the rest of the gain back into your homestead, you could defer tax on that gain?

 

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Posted
50 minutes ago, horn4life said:

So if I buy my homestead for $500K and via appreciation it becomes worth $1.2 million. I cannot then sell the place for $1.2 million, buy a new homestead for $700K million and pocket the $500K exclusion? 

I thought as long as you put the rest of the gain back into your homestead, you could defer tax on that gain?

 

You would owe capital gains on the difference minus qualified improvements you made to the property while you owned it.  This is where it can get a little fucky since regular maintenance doesn’t count.  So a new pool, remodel, etc probably qualify but fixing things doesn’t.

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Posted
13 hours ago, Hefeweizen said:

You would owe capital gains on the difference minus qualified improvements you made to the property while you owned it.  This is where it can get a little fucky since regular maintenance doesn’t count.  So a new pool, remodel, etc probably qualify but fixing things doesn’t.

Ok I stand corrected.  I thought if you bought a homestead of equal or great value you could defer all the gain.  I guess I wasn't contemplating exceeding the $500K cap when I actually thought about this a few years back.   

So the exclusion is the 121 Exclusion. According to Rocket I can use this every two years?  This would be important to me, because if I were to talk the wife into making a homestead move, It would be to convert our current homestead into an income producing property, while I remodeled a new homestead.  

This is the scenario I am considering trying to pull off.  I have a neighbor whose parents home has been vacant for a couple years.  Full of Christmas hoarding crap.  But she is needing to get some cash finally, and the property is in trust, and I was nervous about trying to buy the property from a trust.  Mainly as I was going to give her almost nothing down, with a future balloon payment.  Or interest only loan to keep my costs down by renovating. 

In this scenario I could convert my current homestead into a rental, thus opening the door for a future 1031 exchange.  In this scenario my wife and I (filing jointly) could Sell the property (within the 2 or 5 years homestead 121 limitation) and take $500K cash out tax free, and defer any additional gain beyond that amount into a new investment property using the 1031 exchange.  In essence converting the homestead residual cap gains into rental property equity, correct?

HOWEVER - I thought I was limited in taking the 121 cap gain exclusion to once every 5 years?  Rocket is saying once every two years?  

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Posted

I think you need to consult with a tax advisor.  I don’t know much about 1031 exchanges but everyone I know who has used them used an expert to guide them.  I believe for the capital gains exclusion you have to resided in the home for a minimum of 2 years within the past five years, but that’s recollection.

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Posted

The tax law used to be that if you reinvested your gain in a house of equal or greater value you didn’t have to pay tax on the gain. But that changed a long time ago.

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Posted
2 hours ago, tbone_ said:

The tax law used to be that if you reinvested your gain in a house of equal or greater value you didn’t have to pay tax on the gain. But that changed a long time ago.

It's because I remember shit, and I'm old...I guess I thought the $250/500K was in addition!  But much better to have the flexibility to make multiple homestead sales and convert some of that gain into tax free cash.  

But if you are young and willing to move around a couple times, and are handy remodeling, it's a great way to grow your net worth!  Especially if you start off with this as a strategy.  I was explaining this to a roofing guy who was young and explaining that hell he already had connections for the most expensive part of many remodels, a roof!  And just knowing folks that can help you build shit can help turn that sweat equity into real equity.  

Looks like you might be able to take the deduction technically every 2 years + 1 day?  Assuming closing on sale and purchase of homesteads at same time.

But what is also interesting to me is that 5 year window.  It opens up the ability to move to a new homestead and convert your existing homestead into a rental unit to benefit from more years of appreciation.  While at the same time remodeling your new homestead.  The we get the mortgage finance folks in on the game.  And then you are using your homestead in combination with a BRRR strategy.  

 

Posted
On 5/10/2025 at 9:11 AM, tbone_ said:

The tax law used to be that if you reinvested your gain in a house of equal or greater value you didn’t have to pay tax on the gain. But that changed a long time ago.

the "rollover residence replacement" rule.

Posted
7 hours ago, Gil Bang said:

the "rollover residence replacement" rule.

And it ended almost 30 years ago. It's amazing how things get ingrained in people's memories. 

Posted
On 5/9/2025 at 4:11 PM, horn4life said:

So if I buy my homestead for $500K and via appreciation it becomes worth $1.2 million. I cannot then sell the place for $1.2 million, buy a new homestead for $700K million and pocket the $500K exclusion? 

I thought as long as you put the rest of the gain back into your homestead, you could defer tax on that gain?

 

Where are you trying to buy a house that costs $700k million?

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Posted
On 5/8/2025 at 8:33 AM, Im_smarter_then_you said:

Is there a way of not paying cap gains tax after selling a house?

Get elected to Congress.

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Posted
14 hours ago, westexhorn said:

US bond yield not looking hot

We are stuck like chuck and it doesn’t matter how low inflation gets or how shitty the job picture looks market be all like “no soup for you”. 

Posted
48 minutes ago, Wulaw Horn said:

We are stuck like chuck and it doesn’t matter how low inflation gets or how shitty the job picture looks market be all like “no soup for you”. 

In a way, this is part of what the senior adviser for Trump admin wants; discourage foreigners from holding US treasuries and to weaken the dollar so our manufacturing and exporting can become more attractive.  I think his name Stephen Miran?  He has papers out there on november of 2024.

Posted
2 minutes ago, westexhorn said:

In a way, this is part of what the senior adviser for Trump admin wants; discourage foreigners from holding US treasuries and to weaken the dollar so our manufacturing and exporting can become more attractive.  I think his name Stephen Miran?  He has papers out there on november of 2024.

Maybe one or two of them. Trump wants interest rates lower yesterday. He’s a builder and a debtor. Those guys fundamentally are oriented to wanting low interest rates. 

Posted
Just now, Wulaw Horn said:

Maybe one or two of them. Trump wants interest rates lower yesterday. He’s a builder and a debtor. Those guys fundamentally are oriented to wanting low interest rates. 

Unfortunately, i dont know how else they can bring the yield down for long term US bonds...  If the market does not think the US fiscal policy is sound and that the deficit and spending as well as the servicing of these ever increasing debt is out of control, then demand for these bonds will keep going down.  

From what i've read, I think the ultimate path will be devaluing USDs as we print and inflate away the debt, and along with our quality of life...  But i dont fucking know anything about these shit

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Posted
1 hour ago, Wulaw Horn said:

Maybe one or two of them. Trump wants interest rates lower yesterday. He’s a builder and a debtor. Those guys fundamentally are oriented to wanting low interest rates. 

You can want anything.  But Trump is doing what he promised, and actions thus far, are about the scenario I predicted last fall.  Tariff inflationary pressures hamstringing the fed, and big increase in US debt via legislation coming down the pipeline.  These actions are not going to be conducive for bond holders to ask for less interest, for a risker investment.  So yep, stuck like chuck.   

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Posted
55 minutes ago, horn4life said:

You can want anything.  But Trump is doing what he promised, and actions thus far, are about the scenario I predicted last fall.  Tariff inflationary pressures hamstringing the fed, and big increase in US debt via legislation coming down the pipeline.  These actions are not going to be conducive for bond holders to ask for less interest, for a risker investment.  So yep, stuck like chuck.   

I referred back with want because I was directly answering him- who said he thinks this might be what Trump wants. That’s the only reason I spoke about it in that sense. 
so far inflation is going down even 1.5 months after “liberation day”. Last quarter inflation was 1.5% and that is with shelter being dumbly higher than it should be. 
There’s no US legislation coming down the pipeline that’s going to be more involved in creating debt than we already have.  Thats because, other than reconciliation there is no legislation that’s going to happen.  I don’t think spending gets worked back much in reconciliation but they aren’t expanding spending in a major way. 
As far as “the tax cuts” go all they are doing is extending what we were already doing and taking a practical  approach to tips (it’s not worth cost both financial and credibility wise) to try to collect that small amount of money from tipped employees. That’s small ball. We’ve been living under (basically) the tax regime for 7 years- reconciliation isn’t going to blow up receipts in that sense. 

Posted
2 hours ago, westexhorn said:

In a way, this is part of what the senior adviser for Trump admin wants; discourage foreigners from holding US treasuries and to weaken the dollar so our manufacturing and exporting can become more attractive.  I think his name Stephen Miran?  He has papers out there on november of 2024.

+1, I wasn't aware he was the figurehead behind the Mar-a-Lago Accord:

https://economictimes.indiatimes.com/news/international/global-trends/meet-stephen-miran-the-harvard-hawk-behind-trumps-trade-blitz-eyeing-a-mar-a-lago-accord/articleshow/120352450.cms?from=mdr
 

Quote

Stephen Miran is no longer just a background figure in Washington. Harvard-trained, data-savvy, and unapologetically protectionist, he’s fast becoming the intellectual force behind Donald Trump’s scorched-earth trade policies. Recently elevated to Chair of the White House Council of Economic Advisers, Miran is calling for nothing less than a global economic overhaul—one that would weaken the US dollar, erect new tariff walls, and force foreign nations to pick up the bill for America’s military and financial dominance.

Much of this vision is laid bare in a 41-page essay published quietly in November, just after Trump’s shock return to the political stage. Titled A User's Guide to Restructuring the Global Trading System, it has since become required reading for those trying to understand the White House’s tariff blitz.

At the heart of Miran’s thesis is a single, provocative idea: the dollar is too strong for America’s own good.

"The deep unhappiness with the prevailing economic order is rooted in persistent overvaluation of the dollar and asymmetric trade conditions," Miran wrote.

He argues that a strong dollar makes American goods expensive abroad and foreign imports cheap at home. The result? Domestic industries struggle, factories don’t get built, and trade deficits balloon. By weakening the dollar and imposing strategic tariffs, Miran believes the US could correct long-standing imbalances in the global system.

Quote

To push down the dollar, he suggests America’s trading partners should sell off their dollar reserves. He also recommends converting shorter-term Treasury bonds into ultra-long 100-year debt, so the US can delay repayments and shield itself from interest rate spikes. As if that weren’t controversial enough, Miran wants to charge a “user fee” on foreign official holders of US debt—a move that could spook investors and trigger legal challenges.

Countries that comply, he says, could get lower tariffs and continued access to the US military umbrella.

Posted (edited)

Charging a "user fee" for foreign transactions conducted on US debt is a great way to give up our reserve currency status. Jesus fuckin Christ what an insane and isolationist idea

Edited by Captainant
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Posted (edited)
37 minutes ago, Captainant said:

Charging a "user fee" for foreign transactions conducted on US debt is a great way to give up our reserve currency status. Jesus fuckin Christ what an insane and isolationist idea

He partially wants to do that because his argument is that the risk/benefit profile of being reserve currency may not be worth it anymore.  It's called Triffin's dilemma.

Edited by westexhorn
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Posted
4 minutes ago, westexhorn said:

He partially wants to do that because his argument is that the risk/benefit profile of being reserve currency may not be worth it anymore.  It's called Triffin's dilemma.

If you're an insane person who thinks that buying goods from another country means they're taking advantage of you, maybe it's a dilemma.

It's like saying you'll pass in family fued. Nobody fucking passes! Why are you there if you don't want to play?

Why is our trade and economic advisor seeking to reduce trade and shrink the economy?

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Posted
1 minute ago, Captainant said:

If you're an insane person who thinks that buying goods from another country means they're taking advantage of you, maybe it's a dilemma.

It's like saying you'll pass in family fued. Nobody fucking passes! Why are you there if you don't want to play?

Why is our trade and economic advisor seeking to reduce trade and shrink the economy?

I dont know.  Its retarded.  I think their main argument is regarding manufacturing and how that plays into national security since most stuff is made in China.  And secondly, the widening trade deficit and expanding debt.

This shit is too complex for me and I don't know what the right answer.  What I am more sure of is that complex issues like these are more likely to be fucked than not, especially when our govt can't do things with decades in mind.

Posted
On 5/11/2025 at 7:30 PM, Catpfish said:

And it ended almost 30 years ago. It's amazing how things get ingrained in people's memories. 

My 65yo FIL still makes moves based on this thinking, but fortunately for him I don't think any of his sales ever exceeded $500k in profit.

 

On 5/10/2025 at 2:09 PM, horn4life said:

It's because I remember shit, and I'm old...I guess I thought the $250/500K was in addition!  But much better to have the flexibility to make multiple homestead sales and convert some of that gain into tax free cash.  

But if you are young and willing to move around a couple times, and are handy remodeling, it's a great way to grow your net worth!  Especially if you start off with this as a strategy.  I was explaining this to a roofing guy who was young and explaining that hell he already had connections for the most expensive part of many remodels, a roof!  And just knowing folks that can help you build shit can help turn that sweat equity into real equity.  

This works for people at any age unless your lifestyle preferences outweigh your entrepreneurism. Buy a house you may ultimately flip, put money and sweat equity into it while the surrounding area hopefully appreciates as well, live in it at least two years, rent if you want, sell as long as you've lived in it 2 of the last 5 years, then upgrayyed and/or repeat. The millennials who did not buy their first home before covid are (somewhat justifiably) pissed, but there are still opportunities in most markets as long as they aren't demanding a Joanna Gaines-looking finished product in the most desirable location for under $500k. 

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Posted
3 hours ago, Murfdogg21 said:

This works for people at any age unless your lifestyle preferences outweigh your entrepreneurism. Buy a house you may ultimately flip, put money and sweat equity into it while the surrounding area hopefully appreciates as well, live in it at least two years, rent if you want, sell as long as you've lived in it 2 of the last 5 years, then upgrayyed and/or repeat. The millennials who did not buy their first home before covid are (somewhat justifiably) pissed, but there are still opportunities in most markets as long as they aren't demanding a Joanna Gaines-looking finished product in the most desirable location for under $500k. 

Funny - after seeing that via my insurance and property tax increases my payment went up almost exactly 10 percent.  My wife was more startled than I was, but damn when we have this thing paid off, it may be impossible to stop a steady increase in insurance costs.  

But yes - it's a great vehicle if 1) IF you know about it 2) you can make good improvement/design decisions 3) you are willing to buy a home that NEEDS fixing up. 4) are willing to move a few times.

So would you agree that probably less than 10% of first time home buyers have no idea about the tax free equity exclusions?  Or maybe a better question might be, How many of you were aware of the potential tax free gains possible, when you bought your first home?

 

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Posted

I tell the “kids” I hire to do this and they’ll retire before they’re 45. I also tell them to eat out less and put that extra money to trying to max out their 401k.  I warn them to do the house thing before they have kids because I don’t think it’s possible to do it consistently after that. Assuming our kids move out in roughly 8 years, if I have the energy, I may try to convince the wife to start doing that.  I’ll be 52. Well see. 

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Posted

Anyone else hoping to downsize significantly in retirement? I have the ranch/hole, so I can still live my rural junkyard dreams. But a tidy 2/2 condo we can lock and leave sounds delightful. All I want is a washer/dryer, 2 parking spaces, and not hear the neighbors through the wall too much (well, prjmary on main to age in place). The kids can stay in a hotel or VRBO when they visit. Or if they have kids, we will stay in a hotel while they have the place. We can do yearly vacation rentals over the summers. I'll gladly given the kids the equity amd well enjoy the cheaper insurance, taxes, and upkeep. 

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Posted
12 hours ago, CleverNickname said:

Anyone else hoping to downsize significantly in retirement? I have the ranch/hole, so I can still live my rural junkyard dreams. But a tidy 2/2 condo we can lock and leave sounds delightful. All I want is a washer/dryer, 2 parking spaces, and not hear the neighbors through the wall too much (well, prjmary on main to age in place). The kids can stay in a hotel or VRBO when they visit. Or if they have kids, we will stay in a hotel while they have the place. We can do yearly vacation rentals over the summers. I'll gladly given the kids the equity amd well enjoy the cheaper insurance, taxes, and upkeep. 

I told my wife to reach out to a friend of her mother's who has a 2/2? (maybe 3/2) in an small condo complex we looked at buying a unit in years ago as a starter.  Almost all those units are two story, but they all have a large dining/living area that would be big enough to have large meals. Main thing is it's a single story, with two car garage!  Perfect for downsize and very close to where we live now.  A move to that place might be the one where we would rent our current home, and make the downsize.  OR just sell, and take the gain tax free.

And to be honest... the wall noise won't be an issue as you go deaf... 😉

But yes something to be able to lock and leave without a lot of upkeep if we are traveling.

 

 

 

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Posted

Wtf happened at 8am that caused ten yr to snap spike 5bp. Also saw headline that 30 yr treasury closed at highest in ~20 yrs. 

Posted
14 hours ago, Wulaw Horn said:

So, not great Bob.  Back to looking like 7 & 1/8 is par.  And continue to spin around on the merry go round of suck. 

Think of all the folks that should have closed at 7.05% over the last few weeks.  Instead they were (irrationally in my mind) waiting for rates to fall.  A lot of folks in the Mortgage industry also thought rates would fall.  So the folks writing the mortgages, and the folks taking them on both had forward looking optimism on rates falling back to prior levels.

The sooner folks start selling the lows 7's as the best you may see for several years, and that the best bet is to buy now, perception is reality.  The low rates are not coming back.  Unless the economy tanks, and that's a whole different set of problems for RE. But I would be selling to prospective buyers is that homestead price inflation has historically overrun the cost of financing.  No guarantee, but that's what history says longer term.  That's why so many folks can do cash out refi's a few years down the road.

But you may look back and that 7.125% rates were something that you wish you could get in July...

Posted
16 minutes ago, horn4life said:

Think of all the folks that should have closed at 7.05% over the last few weeks.  Instead they were (irrationally in my mind) waiting for rates to fall.  A lot of folks in the Mortgage industry also thought rates would fall.  So the folks writing the mortgages, and the folks taking them on both had forward looking optimism on rates falling back to prior levels.

The sooner folks start selling the lows 7's as the best you may see for several years, and that the best bet is to buy now, perception is reality.  The low rates are not coming back.  Unless the economy tanks, and that's a whole different set of problems for RE. But I would be selling to prospective buyers is that homestead price inflation has historically overrun the cost of financing.  No guarantee, but that's what history says longer term.  That's why so many folks can do cash out refi's a few years down the road.

But you may look back and that 7.125% rates were something that you wish you could get in July...

A thing I try to keep in mind is that the <5% rates were themselves an abberation. Mortgages in the 80s and 90s were routinely 9 or 10% interest, it's just that principal amounts were a fraction of what they are now. Regular people can't afford properties if rates and principal amounts are so sky-high.

Just the property value inflation has been absurd lately. I'm a beneficiary of it to be sure - my previous home appreciated in value nearly 25% in just five years!! But likewise, my new nextdoor neighbor paid 1/3 of what I did for a bigger house about 15 years ago.

 

It's completely unsustainable for prices to skyrocket like that. If you're on the train already, it's not so bad since your last property helps propel you to your next step up - but otherwise you're completely left behind and getting further behind by the day.

 

Also, I closed my 30yr fixed at 6.825% /humblebrag

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Posted
4 hours ago, Captainant said:

A thing I try to keep in mind is that the <5% rates were themselves an abberation. Mortgages in the 80s and 90s were routinely 9 or 10% interest, it's just that principal amounts were a fraction of what they are now. Regular people can't afford properties if rates and principal amounts are so sky-high.

Just the property value inflation has been absurd lately. I'm a beneficiary of it to be sure - my previous home appreciated in value nearly 25% in just five years!! But likewise, my new nextdoor neighbor paid 1/3 of what I did for a bigger house about 15 years ago.

It's completely unsustainable for prices to skyrocket like that. If you're on the train already, it's not so bad since your last property helps propel you to your next step up - but otherwise you're completely left behind and getting further behind by the day.

Can't put the toothpaste back after the Fed bought $2.3T in MBS, while PPP targeted $500B at business owners so they can further inflate asset prices (equities, Lambos, AirBnBs).  $4.6T was firehosed into the economy and everybody is gaslighting us about how inflation works.  Now nearly 40% of homeowners have no mortgage at all, so that home price isn't going to move much to appeal to affordability.  

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Posted
4 hours ago, horn4life said:

Think of all the folks that should have closed at 7.05% over the last few weeks.  Instead they were (irrationally in my mind) waiting for rates to fall.  A lot of folks in the Mortgage industry also thought rates would fall.  So the folks writing the mortgages, and the folks taking them on both had forward looking optimism on rates falling back to prior levels.

The sooner folks start selling the lows 7's as the best you may see for several years, and that the best bet is to buy now, perception is reality.  The low rates are not coming back.  Unless the economy tanks, and that's a whole different set of problems for RE. But I would be selling to prospective buyers is that homestead price inflation has historically overrun the cost of financing.  No guarantee, but that's what history says longer term.  That's why so many folks can do cash out refi's a few years down the road.

But you may look back and that 7.125% rates were something that you wish you could get in July...

In the last 12 months I have put people in 30 year fixed mortgages (where I paid all the closing costs) as low as 5.625. I unloaded 20 or so one month at 6.125.  Also a bunch of other refinance rates between 6.3 and 6.75. This stuff goes up and down and around and around. What you can pretty much count on, imo, is at least a point spread between the high and low.  So far, the high spread (I think) for the year is like 7.25% and the low is like 6.6%  I hope we get to our 1 point difference between max and min for the year by hitting 6.25% at some point in time, as opposed to hitting 7.6% on the high end (it's not a guarantee there's a 1 point max/min difference but it's pretty close).

The key, as a consumer to my way of thinking, is to be set up with someone who has your best interests at heart and to pay as little as possible for every transaction when rates are high (b/c you are more likely to carry that rate for less time) and to never do something short term or dumb like an arm when rates are low. 

How I've handled this market is:

1) Be a broker- pricing is better (from a consumer standpoint- work with a Broker- they are better and all the data says it)

2) offer to solve everyone's problem (high rates) with an incentive up front and a promise down the road.  So- when you are a well qualified buyer and come into my shop and the average rate is 7.125% I say- here are 2 options:  1) I will give you 3/8 better than the average, or 2) I will do a 1 point buy down for the first year at national average (7.125 bought down to 6.125%) this allows us to kick the can down the road for a year while you get used to the new payments and go from there.  At the end of a year (but I will start watching in 6 months when my EPO goes away) I will refinance you for free at or better than national average (or a number that we agree on before hand depending on your credit situation).  

That puts you in the following situation:  You get 1 point lower than average for the first year or you get 5/8 better than the smoking low rate I'd otherwise give you).  If you make it through the entire year without refinancing first you will have saved X amount.  Once you start paying it back at the non discounted rate you are paying back about 1/30'th higher than you would otherwise be paying back if you would have taken the lower rate. 

So- what that means is the dude with the 1 point buy down today has 42 months to refinance before he would be better off having taken the discounted "permanent" rate.  I don't know the future, but I'm pretty much willing to bet whatever amount of money you want that if the national average is 7.125% today, sometime in the next 42 month it will get below 6.75% which is where your break even point would be if you would have sworn off the 1 point buy down up front and just taken the rate 3/8 lower

3) When it comes to refinancing (in a high rate enviroment) don't pay costs and don't be greedy!  We are still in a pretty high interest rate environment if you look historically over the last 30 or so years.  If you signed up at 7 and I offer you 6.5 paying all your costs just do it. There's literally nothing that can go wrong with that deal. You win.  Is it possible you could have won more if you waited another 3 weeks?  Sure, but it's more likely that you will lose. Over the last 12 months there have been 3 really solid times to refinance- one of those times lasted 4 days, one lasted 2 days and one lasted about 4 hours.  Did I make phone calls during all those times?  You bet. Do I make them to database at other times?  Not really- I don't want to mess around with pushing any deal that could bring any pain in anyway to my borrowers- so it's free (right now) or I'm not calling.  Now- if/when rates get down to 4 will I think this is the correct strategy?  No- pay your own closing costs then- get the lowest rate possible (provided you like the house and are going to be there for a while) and figure you've hit the jackpot. 

I think I mentioned I was fortunate to be one of the (almost) top 100 brokers in America last year. I have closed a lot of transactions.  The last 3 years a lot of them in high interest rate environments. I currently have exactly 11 borrowers in my past customer list (closing in on 1,000) paying interest rates over 7. I can tell you the story on every single one of them too, b/c I've contacted almost all of them with an opportunity to get out:

1) Awful credit- fha loan- can't make 6 payments in a row to streamline, 2) bank Statment loan at 7.125. She was supposed to start paying taxes but didn't.  3) Blind guy that has a 7.125 fHA- got offered 3 times to do 6.5% or better for free (nah- Gabe- that's not enough savings- lets just wait until it matters.  Ok- dude- 13 months later you are still pissing it away). 4) Obstinate jackass, 5) Lost his job- doesn't qulaify 6) Won't call me back 7) in processs right now 8 ) same story as the blind guy but not blind.  Walked away from a 1.4 point saving for free 2 months ago.  Not enough money.  Dude- we are at the closing table and that's your call?  Have fun with the 7.75% for life.  9) Bank statement at 7.5.  10) turned down 3 chances at it.  Waiting for a full point.  I'm like- dude- this is free- no downside- yeah but I mean- a point- who cares about saving $350 a month today if you could chase an extra $150 a month savings later.  Never mind that I told him I'd do it for him again FOR FREE if he waits 6 months.  11) Just a small loan amount. I can't build in enough points to cover their appraisal, lender fees and title fees.  Since we can't do for free we are waiting until we get a significant interest point savings for him.  


That's it. When rates were 7.75% I told my people- don't worry we will put you at 6.75% for a year and take care of you.  And we did.  Same with at 7.125. same with 6.75. I'm staring to wonder if the people who had 6.5's that got bought down to 5.5 are ever going to see that 5.5 again but I bet it happens.  I'd actually be pretty surprised if it didn't but who knows. 

 

This outlook is a mix of optimism (someday- rates will be better and we will take care of it) mixed with pessmism (we don't know when that will happen so take a temp 1 point buy down and we will monitor the shit out of it for the next 42 months and you will probably win).  

The right answer for what to do about the market today (in these times) is always the same- LOCK!  

 

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