Received notice of my mortgage readjustment...

[TerryBPP]

I have dreaded this day for the last 8 months. After trying to refi to no avail (due to the low debt to value), I decided to just pay what ever the adjusted rate is going to be. I have been putting away money just to make the extra payments. I figured it would go up $400 - $500 a month. With my separation in full effect it wasn't going to be easy.

My mortgage is a 3yr ARM, adjusting every 2 year with 2.75 index rate + the current interest rate. Then at the end of 2 years it recalculates.

...so the change was scheduled for Aug. 28th. I receive a letter in the mail from the mortgage company yesterday. Before I open it I know what it is. Heart pounding, palms sweaty, I open the letter.

My reevaluated rate is $100 cheaper a MONTH!!!!!!

Now I'm going to apply the extra saved funds towards the principal and hope the market rebounds a little by Aug. 2010.

[m21sniper]

Congrats!

[onewhippedpuppy]

I'd sink the extra money into the principal, then refi by 2010. Lightning rarely strikes twice, you might not get that lucky again. That would scare the hell out of me......

[john70t]

The city assessors office first attempted to charge me 60% over my current rate. I called the office and the woman on the phone actually lied to me and said it was illegal for them to base value individually: They had to base the property on neighborhood values(some of which were outrageous).

Made an appointment with the Board of Review and brought in a short-n-sweet letter which went like this:
"Dear Board of review,
About X months ago I purchased X property for the price of X.
The property was listed and found through the nationally-accessable MLS system. The buyer and seller were previously unknownst to each other, as was both realtors. A price was negotiated and the sale occured.
The entire process was an arms-length transaction and reflects fair-market value.
Please change my assesed value to reflect fair-market value as required by law.
Thank you, John "

Next stop was going to be the state board of equalization and then court, but the BoR meeting were extremely pleasant and it went through without a hitch. A couple hundred dollars a month ain't chump change ya'know.

FYI- Before relocating, check with a local assessors office and get millage rates on all the local areas. Suprisingly, the next block over might have the same services but half the taxes.

[einreb]

What was so difficult about figuring this out ahead of time?

[widgeon13]

Did your property taxes / assessment go down as well??

[TerryBPP]

Originally Posted by john70t

The city assessors office first attempted to charge me 60% over my current rate. I called the office and the woman on the phone actually lied to me and said it was illegal for them to base value individually: They had to base the property on neighborhood values(some of which were outrageous).

Made an appointment with the Board of Review and brought in a short-n-sweet letter which went like this:
"Dear Board of review,
About X months ago I purchased X property for the price of X.
The property was listed and found through the nationally-accessable MLS system. The buyer and seller were previously unknownst to each other, as was both realtors. A price was negotiated and the sale occured.
The entire process was an arms-length transaction and reflects fair-market value.
Please change my assesed value to reflect fair-market value as required by law.
Thank you, John "

Next stop was going to be the state board of equalization and then court, but the BoR meeting were extremely pleasant and it went through without a hitch. A couple hundred dollars a month ain't chump change ya'know.

We just had a big property tax drop for the same reason. Saved me a few $200 a month. Then I switched insurance companies and got a few inspections and dropped that $900 a year. I was scrambling to minimize costs every month.

I figured worst case scenario I would call the mortgage company and say I couldn't pay the increase and see what they said. "Supposedly" the mortgage companies have been doing in-house negotiations.

[Rick Lee]

I have written here many times that ARM's do adjust down. It's happened to me and will probably happen again with my current LIBOR ARM set to adjust in November 2009.

Terry, let this be a lesson that you can forecast what your ARM is going to do well before you get official notice of it. I doubt your ARM is tied to a "current interest rate". Most ARM's are tied to LIBOR or the One Year T-bill, not the "current interest rate", whatever that is. Most ARM's are also capped. Usually, the cap is higher for the first adjustment than for subsequent ones and there is also a cap for life of the loan. If your cap is 3.00 and your current rate is 5.00%, then your rate cannot go below 2% or higher than 8% for the first adjustment. Find out what your index is. You know your margin, but what's the index? You can see it in the WSJ every day, add your margin to that number and then compare the sum to your current rate plus or minus the first adjustment cap.

I'm currently at 4.375% and it's tied to LIBOR. If it were to adjust today, it would go way down.

[TerryBPP]

Originally Posted by einreb

What was so difficult about figuring this out ahead of time?

Its based on the current interest rate at the time of reassessment. 8 months ago it was 7%. Luckily its been dropping since but I was worried there would be a spike.

Originally Posted by Rick Lee

I have written here many times that ARM's do adjust down. It's happened to me and will probably happen again with my current LIBOR ARM set to adjust in November 2009.

Terry, let this be a lesson that you can forecast what your ARM is going to do well before you get official notice of it. I doubt your ARM is tied to a "current interest rate". Most ARM's are tied to LIBOR or the One Year T-bill, not the "current interest rate", whatever that is. Most ARM's are also capped. Usually, the cap is higher for the first adjustment than for subsequent ones and there is also a cap for life of the loan. If your cap is 3.00 and your current rate is 5.00%, then your rate cannot go below 2% or higher than 8% for the first adjustment. Find out what your index is. You know your margin, but what's the index? You can see it in the WSJ every day, add your margin to that number and then compare the sum to your current rate plus or minus the first adjustment cap.

I'm currently at 4.375% and it's tied to LIBOR. If it were to adjust today, it would go way down.

Mine actually is based on the current interest rate, at least thats how the paperwork is phrased. Also, the cap on the adjustment is higher the 2nd change than the 1st. Crazy mortgage.

[Rick Lee]

Originally Posted by john70t

The city assessors office first attempted to charge me 60% over my current rate. I called the office and the woman on the phone actually lied to me and said it was illegal for them to base value individually: They had to base the property on neighborhood values(some of which were outrageous).

This has absolutely nothing to do with your interest rate or any ARM.

[john70t]

(Thanks, john has to go back to subject comprehension night classes and drink more coffee before typing)

[widgeon13]

Originally Posted by Rick Lee

This has absolutely nothing to do with your interest rate or any ARM.

Agree that the two are completely unrelated but the real eastate market today does give the homeowner the opportunity to contest the current property assessment and then if the taxes are lowered, the cash can then be directed to possible increase in the mortgage payment.

[legion]

I have a 30-year fixed. Every year I get my coupon book, by monthly payments decline--mostly because I've been overpaying principal and they are re-amortizing the mortgage to keep the 30-year term. I still keep paying the same amount I've paid since month #1. At this point it's nice to know that if I had to I could drop down to paying the "normal" payment a free up a few hundred dollars a month.

I'm also prepaid on my student loan up to 2012. That is going to get to the point pretty soon where I'm just going to write a check for the balance...

[Rick Lee]

Originally Posted by legion

I have a 30-year fixed. Every year I get my coupon book, by monthly payments decline--mostly because I've been overpaying principal and they are re-amortizing the mortgage to keep the 30-year term. I still keep paying the same amount I've paid since month #1. At this point it's nice to know that if I had to I could drop down to paying the "normal" payment a free up a few hundred dollars a month.

I'm also prepaid on my student loan up to 2012. That is going to get to the point pretty soon where I'm just going to write a check for the balance...

You may want to look into that reamortizing thing. The usual rule is that one extra P&I payment per year will knock the last seven years - 84 payments - off a 30 yr. fixed rate mortgage. If you're paying extra and they keep reamortizing it, then it looks like you'll never have it totally paid off. Be sure they applying your extra payments to princ. and not interest.

[VincentVega]

write a check for the balance..

That was a great feeling.

ARM's still scare me, but it sounds like with a little luck and right loan it can turn out ok.

[einreb]

Originally Posted by Rick Lee

You may want to look into that reamortizing thing.

You usually have to pay to have the mortgage re-amortized. For people that have substantially paid down their mortgage in advance and want the flexibility of lower payments over the same life of the loan it can make sense rather than a refi (depending available rates).

[onewhippedpuppy]

Rick, I think that's the required payment to take the mortgage full term. The principal is decreasing at a higher than expected rate, so the payments adjust downwards to keep the term the same. Ultimately the principal is still going down, so he'll have it paid off quicker if he keeps up the extra payments.

Legion, good call! It takes discipline to pay extra on your mortgage, but it's worth every penny. Someday you'll feel good to look back at your loan and see how much interest you saved.

[TerryBPP]

The mortgage company did include a additional payment schedule to amortize the loan towards the principal. Thinking of doing it that way but I'm going to call 1st.

[Joe Ricard]

Make your money work for you.
Keep the increased payment schedule going to principle and yep write a check for the balance as soon as you can.

I did this on my 1st house. and now doing the same thing on two more I am using as rentals.

Come on retirement age. I'm ready.

[Gogar]

Originally Posted by widgeon13

Agree that the two are completely unrelated but the real eastate market today does give the homeowner the opportunity to contest the current property assessment and then if the taxes are lowered, the cash can then be directed to possible increase in the mortgage payment.

I don't want to threadjack or continue the confusion, but I wanted to mention that I contested my valuation last year. My taxes had gone up about 20%. I found 3 neighborhood comps and contested my value; showed comps that were 60-70% my 'assessed' value.

I won!!!!! They dropped my 'assessed' value by $1500!!!!! That's about . . . . oh, I don't know . . . .

.3%

It lowered my property taxes by approximately ZERO. Thanks, Denver!