Re:Rocket Mortgage to trim 8% of workforce as home-loan mark...
by sokoloff on Thursday April 28, 2022 @09:17AM
(#31192085)
The differences are apparent in the US as well. The bank is making offers to a broad population without knowing their life plans. The borrower has a better idea of their individual life plans. I was buying my “lifetime home” 15 years ago and so took a fixed rate. When I first refinanced, I still had the same plans. When I second refinanced, I still had the same plans.
Even among fixed rate products, there’s an option to buy down the fixed rate. Those usually have a point in the future where all choices are about the same, shorter favoring not paying points and long favoring buying discount points (this crossover point varies over time by current and expected rates, but is in the 4-8 year range typically).
Re:Rocket Mortgage to trim 8% of workforce as home-loan mark...
by simulate-me on Thursday April 28, 2022 @08:56AM
(#31191879)
In the US, you can refinance your loans. Essentially taking out a new loan to pay off your old mortgage. The new loan has the new market interest rate. In the US, you’re typically allowed to pay off additional principal without any penalty, so you can end a loan by paying off the outstanding principal without needing the pay the remainder of the interest on the loan.
Re:Rocket Mortgage to trim 8% of workforce as home-loan mark...
by nsteel on Thursday April 28, 2022 @09:14AM
(#31192049)
As I understand it, it's this refinancing that leads US citizens in the UK ending up with a surprising US capital gains bill after they re-mortgage their UK property. And we also (normally) have ERCs in the UK so as usual, the rest is the worst of both worlds.
Ideally one could renounce the citizenship, oh wait...
Re:Rocket Mortgage to trim 8% of workforce as home-loan mark...
by simulate-me on Thursday April 28, 2022 @09:26AM
(#31192164)
The IRS does not consider a refinance (even a cash-out refinance) to be a capital gain. The IRS also allows for 250K (500K if married) of tax-free capital gains on the sale of a primary residence. Maybe you misunderstood your friends’ situations.
Re:Rocket Mortgage to trim 8% of workforce as home-loan mark...
by tristor on Thursday April 28, 2022 @10:20AM
(#31192787)
This is only true for a primary residence located in the US. If it’s a foreign asset, it’s taxed normally. The IRS deeply screws expats.
Re:Rocket Mortgage to trim 8% of workforce as home-loan mark...
by simulate-me on Thursday April 28, 2022 @11:02AM
(#31193319)
I just looked this up and you're right. If you're subject to the expatriate tax then you're automatically disqualified from the exemption. From my reading, it seems like there is a small loophole. You can sell a foreign property if you move back to the U.S. and meet all the other primary residence conditions.
Re:Rocket Mortgage to trim 8% of workforce as home-loan mark...
by nsteel on Thursday April 28, 2022 @11:25AM
(#31193661)
Exactly. And what's even more brilliant is that it entirely depends on the exchange rates at the start and end of the period. So a zero gain (or even a loss) over that period in the UK can still result in US tax owed.
Sure, but .. nothing else is fixed for those 30 years? Not your salary, the price of fuel, your place of work, life circumstances? And you're paying a premium at the start for this.
It's more apparent in the UK where you can choose how long you want the fix for and see the interest rate you're offered go up.
> you can benefit from interest rate volatility since you can always buy back the debt at par.
Obviously the bank knows this and charges you a small premium over the spot rate so they don't lose money.
> If the rate doubles (to 2x%) you can refinance and you now only owe half ($n/2)
I don't understand this: the amount outstanding - the redemption value - of a fixed rate mortgage is known in advance at every month throughout its term, regardless of what the market interest rate is?