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On the APR; not using a floor to quote is a loophole and not based on the intended Spirit of the APR. I also stand by my opinion that each client needs to understand an APR and use it for his scenario. (Are you selling in 4 years?, Then use a 4 year Balloon to calculate his/her APR etc)
On W. F. negative APR, I think they are following legal statutes but it is a loophole and as I strongly feel, against the spirit intended of the APR. We will see what happens with C. C. Banks, Class action suit because of this exact loophole. The Court is deciding this very issue on disclosed APR. You can legally rescind a loan based on false TIL. Many "Loan modification and Foreclosure companies" are really legal firms using this same "False advertising to rescind a loan and save a home defense"
Do you think a negative APR accurately and easily discloses the cost of the loan to a consumer? Points, fees and origination of the credit obtained?
Jaime, I have no idea what you are reading but neither conforming or Jumbo Arms have a rate floor. See Fannie guides in the next post. My opinion of your advising the OP is poor. Now you say he can refi anytime. If you read his post a few times you may pick up on his statement that the GFE for a refi is LOWER by $2/month, which means he does not know what his rate is, he typed the wrong rate, or he is dropping MI. The bottom line is he has a 1 year arm and he is weighing his options as to refi now for the safety of a fixed rate and keep the same payment. It's real easy to hit him with his recapture time, tax consequence, and some BS about his APR but he is looking for some guidance and you have not given him any.
Short term loans are also not following your theory. The same purchase LOC I got 6 months ago for a client was at Prime and it is now Prime plus 1.5% from the same lender. Once the economy shows any kind of growth, the Feds will start screaming inflation everytime they open their mouths and rates will start climbing. I do not claim to know when that will start or what the price of a 30 yr mortgage will be next week, but I do know the 30 year rate fluctuated between 4.5 and 4.75 last week so not even 4.5 is solid for now.The OP stated he was quoted 4.875% and you say it is not a good rate because of the yield on the 10 yr. The important thing to the OP is his quote is a $2 difference from his current payment and he wont have to WORRY about the rate rising for the rest of the time he lives in the house. Do you get that?
Try working directly with your current lender!
With that kind of equity they should have no problem refinancing it. And they have a reason to try to keep a good client like you-- they want to make their money over time. They may be willing to do it with no-closing cost / no points. And simply lock you at your current rate.
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