The Mortgage Encyclopedia This page intentionally left blank The Mortgage Encyclopedia An Authoritative Guide to Mortgage Programs, Practices, Prices, and Pitfalls Jack Guttentag “The Mortgage Professor” McGraw-Hill New York Chicago San Francisco Lisbon London Madrid Mexico City Milan New Delhi San Juan Seoul Singapore Sydney Toronto Copyright © 2004 by Jack Guttentag All rights reserved Manufactured in the United States of America Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written permission of the publisher 0-07-145849-2 The material in this eBook also appears in the print version of this title: 0-07-142165-3 All trademarks are trademarks of their respective owners Rather than put a trademark symbol after every occurrence of a trademarked name, we use names in an editorial fashion only, and to the benefit of the trademark owner, with no intention of infringement of the trademark Where such designations appear in this book, they have been printed with initial caps McGraw-Hill eBooks are available at special quantity discounts to use as premiums and sales promotions, or for use in corporate training programs For more information, please contact George Hoare, Special Sales, at george_hoare@mcgraw-hill.com or (212) 904-4069 TERMS OF USE This is a copyrighted work and The McGraw-Hill Companies, Inc (“McGraw-Hill”) and its licensors reserve all rights in and to the work Use of this work is subject to these terms Except as permitted under the Copyright Act of 1976 and the right to store and retrieve one copy of the work, you may not decompile, disassemble, reverse engineer, reproduce, modify, create derivative works based upon, transmit, distribute, disseminate, sell, publish or sublicense the work or any part of it without McGraw-Hill’s prior consent You may use the work for your own noncommercial and personal use; any other use of the work is strictly prohibited Your right to use the work may be terminated if you fail to comply with these terms THE WORK IS PROVIDED “AS IS.” McGRAW-HILL AND ITS LICENSORS MAKE NO GUARANTEES OR WARRANTIES AS TO THE ACCURACY, ADEQUACY OR COMPLETENESS OF OR RESULTS TO BE OBTAINED FROM USING THE WORK, INCLUDING ANY INFORMATION THAT CAN BE ACCESSED THROUGH THE WORK VIA HYPERLINK OR OTHERWISE, AND EXPRESSLY DISCLAIM ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE McGraw-Hill and its licensors not warrant or guarantee that the functions contained in the work will meet your requirements or that its operation will be uninterrupted or error free Neither McGraw-Hill nor its licensors shall be liable to you or anyone else for any inaccuracy, error or omission, regardless of cause, in the work or for any damages resulting therefrom McGraw-Hill has no responsibility for the content of any information accessed through the work Under no circumstances shall McGraw-Hill and/or its licensors be liable for any indirect, incidental, special, punitive, consequential or similar damages that result from the use of or inability to use the work, even if any of them has been advised of the possibility of such damages This limitation of liability shall apply to any claim or cause whatsoever whether such claim or cause arises in contract, tort or otherwise DOI: 10.1036/0071458492 ������������ Want to learn more? 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If you’d like more information about this book, its author, or related books and websites, please click here For more information about this title, click here Topics A A-Credit Acceleration Clause Accrued Interest Adjustable Rate Mortgage (ARM) Adjustment Interval Affordability Agreement of Sale Alternative Documentation Amortization Annual Percentage Rate (APR) Application Application Fee Appraisal Appraisal Fee Appraiser Approval APR ARM Assignment Assumable Mortgage Assumption Auction Sites Authorized User Automated Underwriting Automated Underwriting System v 1 1 12 13 15 15 16 19 22 22 22 22 22 23 23 23 23 23 27 27 27 27 27 Topics B Balance Balloon Balloon Mortgage Bimonthly Mortgage Biweekly Mortgage Bridge Loan Builder-Financed Construction 27 28 28 29 29 30 31 C Cap Cash-Out Refi Closing Closing Costs Closing Date Co-Borrowers COFI Conforming Mortgage Construction Financing Contract Chicanery Conversion Option Correspondent Lender Co-Signing Cost-of-Savings Index (COSI) Credit Report Credit Score Cumulative Interest Current Index Value 31 31 32 32 32 33 36 36 36 39 39 39 39 40 40 41 45 46 D Deadbeat Debt Consolidation Deed in Lieu of Foreclosure Default Deferred Interest vi 46 46 48 48 48 Topics Delinquency Demand Clause Direct Lender Discount Points Discretionary ARM Documentation Requirements Down Payment “Dual-Apper” Dual Index Mortgage Due-on-Sale Clause 48 48 49 49 49 49 51 58 58 58 E Effective Rate 80/10/10 and 80/15/5 Loan Plans Equity Escrow Account 59 59 59 59 F Fallout Fannie Mae FHA Mortgage FICO Score Financing Points First Mortgage Fixed-Rate Mortgage (FRM) Float Float-Down Forbearance Agreement Forclosure Freddie Mac Fully Amortizing Payment Fully Indexed Rate 61 61 61 64 64 64 64 65 65 65 65 65 65 65 G Generic Prices Gift of Equity 66 66 vii Topics Good Faith Estimate (GFE) Government National Mortgage Association (GNMA) Grace Period Graduated Payment Mortgage (GPM) 66 66 66 66 H Hazard Insurance Historical Scenario Homebuyer Protection Plan Home Equity Conversion Mortgage (HECM) Home Equity Line Home Equity Line of Credit (HELOC) Home Equity Loan Home Keeper Homeowner’s Equity Housing Bank Housing Expense Housing Expense Ratio Housing Investment 67 67 67 67 67 67 71 71 71 71 73 73 73 I Indexed ARMs Initial Interest Rate Initial Rate Period Interest Accrual Period Interest Cost (IC) Interest Due Interest-Only Mortgage (Option) Interest Payment Interest Rate Interest Rate Adjustment Period Interest Rate Ceiling Interest Rate Decrease Cap Interest Rate Floor viii 76 76 77 77 77 78 78 81 82 83 83 83 84 Refinance Break-Even Tables Break-Even Periods (in Months) Term Left on Current Loan: 120 months Term on New Loan: 30 years Points: 1.00% Income Tax Bracket: Pre-Tax Points and Costs: Paid in Cash Other Closing Costs as a Percent of Loan Amount Interest Rate 25% Reduction 0.125% 0.25% 0.375% 0.5% 0.625% 0.75% 0.875% 1% 1.125% 1.25% 1.375% 1.5% 1.625% 1.75% 1.875% 2% 2.125% 2.25% 2.375% 2.5% 2.625% 2.75% 2.875% 3% 3.125% 3.25% 3.375% 3.5% 3.625% 3.75% 3.875% 4% None None None None None None None 21 17 15 13 12 11 10 8 7 6 6 5 5 5 4 5% None None None None None None None 30 22 18 16 14 13 12 11 10 9 8 7 6 6 5 75% 1.00% 1.25% 1.50% 1.75% 2.00% 2.50% 3.00% 3.50% 4.00% None None None None None None None None 28 22 19 17 15 14 13 12 11 10 10 9 8 7 7 6 6 None None None None None None None None None 27 23 20 18 16 15 14 13 12 11 11 10 10 9 8 8 7 7 None None None None None None None None None 35 27 23 20 18 17 16 14 14 13 12 11 11 10 10 10 9 8 8 None None None None None None None None None None 32 27 23 21 19 17 16 15 14 13 13 12 12 11 11 10 10 9 8 303 None None None None None None None None None None 40 31 26 24 21 20 18 17 16 15 14 13 13 12 12 11 11 10 10 10 9 None None None None None None None None None None None 36 30 26 24 22 20 19 17 16 15 15 14 13 13 12 12 11 11 11 10 10 None None None None None None None None None None None None 39 33 29 26 24 22 21 19 18 17 16 16 15 14 14 13 13 12 12 11 None None None None None None None None None None None None None 42 35 31 28 26 24 23 21 20 19 18 17 16 16 15 15 14 14 13 None None None None None None None None None None None None None None 43 37 33 30 28 26 24 23 22 21 20 19 18 17 17 16 15 15 None None None None None None None None None None None None None None 61 45 39 35 32 29 27 26 24 23 22 21 20 19 18 18 17 17 Refinance Break-Even Tables Break-Even Periods (in Months) Term Left on Current Loan: 120 months Term on New Loan: 30 years Points: 2.00% Income Tax Bracket: Pre-Tax Points and Costs: Paid in Cash Other Closing Costs as a Percent of Loan Amount Interest Rate 25% Reduction 0.125% 0.25% 0.375% 0.5% 0.625% 0.75% 0.875% 1% 1.125% 1.25% 1.375% 1.5% 1.625% 1.75% 1.875% 2% 2.125% 2.25% 2.375% 2.5% 2.625% 2.75% 2.875% 3% 3.125% 3.25% 3.375% 3.5% 3.625% 3.75% 3.875% 4% None None None None None None None None None 35 27 23 20 18 17 16 14 14 13 12 11 11 10 10 10 9 8 8 5% None None None None None None None None None None 32 27 23 21 19 17 16 15 14 13 13 12 12 11 11 10 10 9 8 75% 1.00% 1.25% 1.50% 1.75% 2.00% 2.50% 3.00% 3.50% 4.00% None None None None None None None None None None 40 31 26 24 21 20 18 17 16 15 14 13 13 12 12 11 11 10 10 10 9 None None None None None None None None None None None 36 30 26 24 22 20 19 17 16 15 15 14 13 13 12 12 11 11 11 10 10 None None None None None None None None None None None 44 34 29 26 24 22 20 19 18 17 16 15 14 14 13 13 12 12 11 11 11 None None None None None None None None None None None None 39 33 29 26 24 22 21 19 18 17 16 16 15 14 14 13 13 12 12 11 304 None None None None None None None None None None None None 47 37 32 29 26 24 22 21 20 19 18 17 16 15 15 14 14 13 13 12 None None None None None None None None None None None None None 42 35 31 28 26 24 23 21 20 19 18 17 16 16 15 15 14 14 13 None None None None None None None None None None None None None None 43 37 33 30 28 26 24 23 22 21 20 19 18 17 17 16 15 15 None None None None None None None None None None None None None None 61 45 39 35 32 29 27 26 24 23 22 21 20 19 18 18 17 17 None None None None None None None None None None None None None None None 57 46 40 36 33 31 29 27 26 24 23 22 21 20 20 19 18 None None None None None None None None None None None None None None None None 55 46 41 37 35 32 30 29 27 26 25 23 23 22 21 20 Refinance Break-Even Tables Break-Even Periods (in Months) Term Left on Current Loan: 120 months Term on New Loan: 30 years Points: 3.00% Income Tax Bracket: Pre-Tax Points and Costs: Paid in Cash Other Closing Costs as a Percent of Loan Amount Interest Rate 25% Reduction 0.125% 0.25% 0.375% 0.5% 0.625% 0.75% 0.875% 1% 1.125% 1.25% 1.375% 1.5% 1.625% 1.75% 1.875% 2% 2.125% 2.25% 2.375% 2.5% 2.625% 2.75% 2.875% 3% 3.125% 3.25% 3.375% 3.5% 3.625% 3.75% 3.875% 4% None None None None None None None None None None None 44 34 29 26 24 22 20 19 18 17 16 15 14 14 13 13 12 12 11 11 11 5% None None None None None None None None None None None None 39 33 29 26 24 22 21 19 18 17 16 16 15 14 14 13 13 12 12 11 75% 1.00% 1.25% 1.50% 1.75% 2.00% 2.50% 3.00% 3.50% 4.00% None None None None None None None None None None None None 47 37 32 29 26 24 22 21 20 19 18 17 16 15 15 14 14 13 13 12 None None None None None None None None None None None None None 42 35 31 28 26 24 23 21 20 19 18 17 16 16 15 15 14 14 13 None None None None None None None None None None None None None 48 39 34 31 28 26 24 23 21 20 19 18 18 17 16 16 15 14 14 None None None None None None None None None None None None None None 43 37 33 30 28 26 24 23 22 21 20 19 18 17 17 16 15 15 305 None None None None None None None None None None None None None None 49 41 36 32 30 28 26 24 23 22 21 20 19 18 17 17 16 16 None None None None None None None None None None None None None None 61 45 39 35 32 29 27 26 24 23 22 21 20 19 18 18 17 17 None None None None None None None None None None None None None None None 57 46 40 36 33 31 29 27 26 24 23 22 21 20 20 19 18 None None None None None None None None None None None None None None None None 55 46 41 37 35 32 30 29 27 26 25 23 23 22 21 20 None None None None None None None None None None None None None None None None None 55 47 42 39 36 33 31 30 28 27 26 25 24 23 22 None None None None None None None None None None None None None None None None None None 54 47 43 39 37 34 32 31 29 28 27 26 25 24 Refinance Break-Even Tables Break-Even Periods (in Months) Term Left on Current Loan: 120 months Term on New Loan: 30 years Points: 0.00% Income Tax Bracket: 40.00% Points and Costs: Paid in Cash Other Closing Costs as a Percent of Loan Amount Interest Rate 25% Reduction 5% 75% 1.00% 1.25% 1.50% 1.75% 2.00% 2.50% 3.00% 3.50% 4.00% 0.125% None None None None None None None None None None None None 0.25% None None None None None None None None None None None None 0.375% None None None None None None None None None None None None 0.5% 18 None None None None None None None None None None None 0.625% 10 None None None None None None None None None None None 0.75% 20 None None None None None None None None None None 0.875% 15 None None None None None None None None None None 1% 12 21 None None None None None None None None None 1.125% 10 17 25 None None None None None None None None 1.25% 14 21 29 None None None None None None None 1.375% 13 18 24 32 None None None None None None 1.5% 11 16 21 34 47 None None None None 26 1.625% 10 14 18 28 35 None None None None 23 1.75% 10 13 17 25 30 44 None None None 21 1.875% 12 15 23 27 37 55 None None 19 2% 11 14 21 24 33 43 None None 17 2.125% 11 13 19 22 29 38 50 None 16 2.25% 10 12 18 21 27 34 43 56 15 2.375% 12 17 19 25 31 39 48 14 2.5% 11 16 18 23 29 35 43 13 2.625% 11 15 17 22 27 33 39 13 2.75% 10 14 16 21 26 31 36 12 2.875% 10 13 15 20 24 29 34 12 3% 13 15 19 23 27 32 11 3.125% 12 14 18 22 26 30 11 3.25% 12 14 17 21 25 29 10 3.375% 11 13 16 20 24 27 10 3.5% 11 13 16 19 23 26 3.625% 11 12 15 18 22 25 3.75% 10 12 15 18 21 24 3.875% 10 11 14 17 20 23 4% 10 11 14 16 19 22 306 Refinance Break-Even Tables Break-Even Periods (in Months) Term Left on Current Loan: 120 months Term on New Loan: 30 years Points: 1.00% Income Tax Bracket: 40.00% Points and Costs: Paid in Cash Other Closing Costs as a Percent of Loan Amount Interest Rate 25% Reduction 0.125% 0.25% 0.375% 0.5% 0.625% 0.75% 0.875% 1% 1.125% 1.25% 1.375% 1.5% 1.625% 1.75% 1.875% 2% 2.125% 2.25% 2.375% 2.5% 2.625% 2.75% 2.875% 3% 3.125% 3.25% 3.375% 3.5% 3.625% 3.75% 3.875% 4% None None None None None None None 26 20 17 15 13 12 11 10 10 8 7 6 6 5 5 5% None None None None None None None None 31 24 20 18 16 15 13 12 12 11 10 10 9 8 7 7 6 75% 1.00% 1.25% 1.50% 1.75% 2.00% 2.50% 3.00% 3.50% 4.00% None None None None None None None None None 35 27 23 20 18 17 16 14 14 13 12 11 11 10 10 10 9 8 8 None None None None None None None None None None 37 29 25 23 20 19 17 16 15 14 14 13 12 12 11 11 10 10 10 9 None None None None None None None None None None None 38 31 27 24 22 21 19 18 17 16 15 14 14 13 13 12 12 11 11 10 10 None None None None None None None None None None None None 39 33 29 26 24 22 21 19 18 17 16 16 15 14 14 13 13 12 12 11 307 None None None None None None None None None None None None None 39 34 30 27 25 23 22 21 19 18 18 17 16 15 15 14 14 13 13 None None None None None None None None None None None None None 50 40 35 31 29 26 25 23 22 21 20 19 18 17 16 16 15 15 14 None None None None None None None None None None None None None None None 47 40 36 33 30 28 27 25 24 23 22 21 20 19 18 18 17 None None None None None None None None None None None None None None None None 54 46 41 37 34 32 30 28 27 26 24 23 22 22 21 20 None None None None None None None None None None None None None None None None None 61 50 45 41 38 35 33 31 30 28 27 26 25 24 23 None None None None None None None None None None None None None None None None None None 69 55 49 44 41 38 36 34 32 31 29 28 27 26 Refinance Break-Even Tables Break-Even Periods (in Months) Term Left on Current Loan: 120 months Term on New Loan: 30 years Points: 2.00% Income Tax Bracket: 40.00% Points and Costs: Paid in Cash Other Closing Costs as a Percent of Loan Amount Interest Rate 25% Reduction 0.125% 0.25% 0.375% 0.5% 0.625% 0.75% 0.875% 1% 1.125% 1.25% 1.375% 1.5% 1.625% 1.75% 1.875% 2% 2.125% 2.25% 2.375% 2.5% 2.625% 2.75% 2.875% 3% 3.125% 3.25% 3.375% 3.5% 3.625% 3.75% 3.875% 4% None None None None None None None None None None 31 26 22 20 18 17 16 15 14 13 12 12 11 11 10 10 9 9 8 5% None None None None None None None None None None None 33 28 25 22 20 19 17 16 15 15 14 13 13 12 12 11 11 10 10 10 75% 1.00% 1.25% 1.50% 1.75% 2.00% 2.50% 3.00% 3.50% 4.00% None None None None None None None None None None None 45 34 30 26 24 22 20 19 18 17 16 15 14 14 13 13 12 12 11 11 11 None None None None None None None None None None None None 44 35 31 28 25 23 22 20 19 18 17 16 16 15 14 14 13 13 12 12 None None None None None None None None None None None None None 44 36 32 29 27 25 23 22 20 19 18 18 17 16 15 15 14 14 13 None None None None None None None None None None None None None None 43 37 33 30 28 26 24 23 22 20 20 19 18 17 16 16 15 15 308 None None None None None None None None None None None None None None 54 43 38 34 31 29 27 25 24 23 22 21 20 19 18 17 17 16 None None None None None None None None None None None None None None None 51 43 38 35 32 30 28 26 25 24 22 21 21 20 19 18 18 None None None None None None None None None None None None None None None None 60 48 43 39 36 33 31 29 28 26 25 24 23 22 21 21 None None None None None None None None None None None None None None None None None None 53 47 43 39 37 34 32 31 29 28 27 26 25 24 None None None None None None None None None None None None None None None None None None None 58 51 46 42 40 37 35 33 32 30 29 28 27 None None None None None None None None None None None None None None None None None None None None 62 54 49 46 42 40 38 36 34 33 31 30 Refinance Break-Even Tables Break-Even Periods (in Months) Term Left on Current Loan: 120 months Term on New Loan: 30 years Points: 3.00% Income Tax Bracket: 40.00% Points and Costs: Paid in Cash Other Closing Costs as a Percent of Loan Amount Interest Rate 25% Reduction 0.125% 0.25% 0.375% 0.5% 0.625% 0.75% 0.875% 1% 1.125% 1.25% 1.375% 1.5% 1.625% 1.75% 1.875% 2% 2.125% 2.25% 2.375% 2.5% 2.625% 2.75% 2.875% 3% 3.125% 3.25% 3.375% 3.5% 3.625% 3.75% 3.875% 4% None None None None None None None None None None None None 38 32 28 26 23 22 20 19 18 17 16 15 15 14 13 13 12 12 12 11 5% None None None None None None None None None None None None None 39 33 30 27 25 23 22 20 19 18 17 16 16 15 15 14 14 13 13 75% 1.00% 1.25% 1.50% 1.75% 2.00% 2.50% 3.00% 3.50% 4.00% None None None None None None None None None None None None None 49 39 34 31 28 26 24 23 21 20 19 18 18 17 16 16 15 14 14 None None None None None None None None None None None None None None 47 40 35 32 29 27 25 24 23 21 20 19 19 18 17 17 16 15 None None None None None None None None None None None None None None None 46 40 36 33 30 28 26 25 24 22 21 20 20 19 18 17 17 None None None None None None None None None None None None None None None 57 46 40 36 33 31 29 27 26 24 23 22 21 20 20 19 18 309 None None None None None None None None None None None None None None None None 53 45 40 37 34 32 30 28 27 25 24 23 22 21 21 20 None None None None None None None None None None None None None None None None None 51 45 40 37 34 32 30 29 27 26 25 24 23 22 21 None None None None None None None None None None None None None None None None None None 57 49 44 41 38 35 33 32 30 29 27 26 25 24 None None None None None None None None None None None None None None None None None None None 62 53 48 44 41 38 36 34 33 31 30 29 27 None None None None None None None None None None None None None None None None None None None None 67 57 51 47 44 41 39 37 35 33 32 31 None None None None None None None None None None None None None None None None None None None None None 71 60 54 50 46 44 41 39 37 36 34 Refinance Break-Even Tables Break-Even Periods (in Months) Term Left on Current Loan: 300 months Term on New Loan: 30 years Points: 0.00% Income Tax Bracket: Pre-Tax Points and Costs: Paid in Cash Other Closing Costs as a Percent of Loan Amount Interest Rate 25% Reduction 0.125% 0.25% 0.375% 0.5% 0.625% 0.75% 0.875% 1% 1.125% 1.25% 1.375% 1.5% 1.625% 1.75% 1.875% 2% 2.125% 2.25% 2.375% 2.5% 2.625% 2.75% 2.875% 3% 3.125% 3.25% 3.375% 3.5% 3.625% 3.75% 3.875% 4% 36 13 5 4 3 3 2 2 2 2 2 2 1 1 1 1 5% 75% 1.00% 1.25% 1.50% 1.75% 2.00% 2.50% 3.00% 3.50% 4.00% None None None None None None None None None None None 28 48 None None None None None None None None None 18 27 37 49 63 81 None None None None None 13 20 26 34 41 50 59 80 111 None None 71 88 109 10 15 21 26 32 38 44 57 56 67 79 13 17 21 26 31 35 45 46 55 64 11 15 18 22 26 30 38 39 47 54 10 13 16 19 22 26 32 35 41 47 11 14 17 20 23 29 31 36 42 10 13 15 18 20 26 28 33 38 12 14 16 18 23 26 30 34 11 13 15 17 21 23 28 32 10 12 14 16 20 22 25 29 11 13 15 18 20 24 27 10 12 14 17 19 22 25 10 11 13 16 18 21 24 11 12 15 17 20 23 10 11 14 16 19 21 11 13 15 18 20 10 13 14 17 19 10 12 14 16 18 12 13 15 18 11 13 15 17 11 12 14 16 10 12 14 16 10 11 13 15 10 11 13 14 7 11 12 14 6 10 12 14 5 10 12 13 10 11 13 310 Refinance Break-Even Tables Break-Even Periods (in Months) Term Left on Current Loan: 300 months Term on New Loan: 30 years Points: 1.00% Income Tax Bracket: Pre-Tax Points and Costs: Paid in Cash Other Closing Costs as a Percent of Loan Amount Interest Rate 25% Reduction 5% 75% 1.00% 1.25% 1.50% 1.75% 2.00% 2.50% 3.00% 3.50% 4.00% 0.125% None None None None None None None None None 0.25% None None None None None None None None None 0.375% 49 63 81 None None None None None None 0.5% 34 41 50 59 69 80 93 111 None 0.625% 26 71 88 32 38 44 50 57 64 0.75% 21 56 67 26 31 35 40 45 50 0.875% 18 46 55 22 26 30 34 38 42 1% 16 39 47 19 22 26 29 32 36 1.125% 14 35 41 17 20 23 26 29 32 1.25% 13 31 36 15 18 20 23 26 28 28 33 1.375% 12 14 16 18 21 23 26 26 30 1.5% 11 13 15 17 19 21 23 23 28 1.625% 10 12 14 16 18 20 22 22 25 1.75% 11 13 15 16 18 20 20 24 1.875% 10 12 14 15 17 19 19 22 2% 10 11 13 14 16 17 18 21 2.125% 11 12 13 15 16 17 20 2.25% 10 11 13 14 15 16 19 2.375% 11 12 13 15 15 18 2.5% 10 11 13 14 14 17 2.625% 10 11 12 13 14 16 2.75% 10 12 13 13 15 2.875% 10 11 12 13 15 3% 10 11 12 12 14 3.125% 10 11 12 14 3.25% 10 11 11 13 3.375% 10 10 11 13 3.5% 7 10 11 12 3.625% 6 10 10 12 3.75% 5 9 10 12 3.875% 8 10 11 4% 7 311 None None None None 109 79 64 54 47 42 38 34 32 29 27 25 24 23 21 20 19 18 18 17 16 16 15 14 14 14 13 13 None None None None 147 93 74 62 54 48 43 39 36 33 31 29 27 25 24 23 22 21 20 19 18 18 17 16 16 15 15 14 None None None None None 109 84 70 61 53 48 44 40 37 34 32 30 28 27 25 24 23 22 21 20 19 19 18 17 17 16 16 Refinance Break-Even Tables Break-Even Periods (n Months) Term Left on Current Loan: 300 months Term on New Loan: 30 years Points: 2.00% Income Tax Bracket: Pre-Tax Points and Costs: Paid in Cash Other Closing Costs as a Percent of Loan Amount Interest Rate 25% Reduction 5% 75% 1.00% 1.25% 1.50% 1.75% 2.00% 2.50% 3.00% 3.50% 4.00% 0.125% None None None None None None None 0.25% None None None None None None None 0.375% None None None None None None None 0.5% 69 80 93 111 None None None 0.625% 50 71 79 88 98 57 64 0.75% 40 56 61 67 73 45 50 0.875% 34 46 50 55 59 38 42 1% 29 39 43 47 50 32 36 1.125% 26 35 38 41 44 29 32 1.25% 23 31 34 36 39 26 28 28 30 33 35 1.375% 21 23 26 26 28 30 32 1.5% 19 21 23 23 25 28 30 1.625% 18 20 22 22 24 25 27 1.75% 16 18 20 20 22 24 25 1.875% 15 17 19 19 21 22 24 2% 14 16 17 18 19 21 22 2.125% 13 15 16 17 18 20 21 2.25% 13 14 15 16 17 19 20 2.375% 12 13 15 15 16 18 19 2.5% 11 13 14 14 16 17 18 2.625% 11 12 13 14 15 16 17 2.75% 10 12 13 13 14 15 17 2.875% 10 11 12 13 14 15 16 3% 10 11 12 12 13 14 15 3.125% 10 11 12 13 14 15 3.25% 10 11 11 12 13 14 3.375% 10 10 11 12 13 14 3.5% 10 11 11 12 13 3.625% 10 10 11 12 13 3.75% 9 10 11 12 12 3.875% 8 10 10 11 12 4% 312 None None None None 109 79 64 54 47 42 38 34 32 29 27 25 24 23 21 20 19 18 18 17 16 16 15 14 14 14 13 13 None None None None 147 93 74 62 54 48 43 39 36 33 31 29 27 25 24 23 22 21 20 19 18 18 17 16 16 15 15 14 None None None None None 109 84 70 61 53 48 44 40 37 34 32 30 28 27 25 24 23 22 21 20 19 19 18 17 17 16 16 None None None None None 129 96 79 68 60 53 48 44 41 38 35 33 31 29 28 27 25 24 23 22 21 21 20 19 19 18 17 None None None None None 165 108 88 75 66 59 53 48 45 41 39 36 34 32 31 29 28 26 25 24 23 23 22 21 20 20 19 Refinance Break-Even Tables Break-Even Periods (in Months) Term Left on Current Loan: 300 months Term on New Loan: 30 years Points: 3.00% Income Tax Bracket: Pre-Tax Points and Costs: Paid in Cash Other Closing Costs as a Percent of Loan Amount Interest Rate 25% Reduction 0.125% 0.25% 0.375% 0.5% 0.625% 0.75% 0.875% 1% 1.125% 1.25% 1.375% 1.5% 1.625% 1.75% 1.875% 2% 2.125% 2.25% 2.375% 2.5% 2.625% 2.75% 2.875% 3% 3.125% 3.25% 3.375% 3.5% 3.625% 3.75% 3.875% 4% None None None None 79 61 50 43 38 34 30 28 25 24 22 21 19 18 17 16 16 15 14 14 13 13 12 12 11 11 11 10 5% None None None None 88 67 55 47 41 36 33 30 28 25 24 22 21 20 19 18 17 16 15 15 14 14 13 13 12 12 12 11 75% 1.00% 1.25% 1.50% 1.75% 2.00% 2.50% 3.00% 3.50% 4.00% None None None None 98 73 59 50 44 39 35 32 30 27 25 24 22 21 20 19 18 17 17 16 15 15 14 14 13 13 12 12 None None None None 109 79 64 54 47 42 38 34 32 29 27 25 24 23 21 20 19 18 18 17 16 16 15 14 14 14 13 13 None None None None 124 86 69 58 50 45 40 37 34 31 29 27 25 24 23 22 20 20 19 18 17 17 16 15 15 14 14 13 None None None None 147 93 74 62 54 48 43 39 36 33 31 29 27 25 24 23 22 21 20 19 18 18 17 16 16 15 15 14 313 None None None None None 100 79 66 57 51 45 41 38 35 32 30 28 27 25 24 23 22 21 20 19 18 18 17 17 16 16 15 None None None None None 109 84 70 61 53 48 44 40 37 34 32 30 28 27 25 24 23 22 21 20 19 19 18 17 17 16 16 None None None None None 129 96 79 68 60 53 48 44 41 38 35 33 31 29 28 27 25 24 23 22 21 21 20 19 19 18 17 None None None None None 165 108 88 75 66 59 53 48 45 41 39 36 34 32 31 29 28 26 25 24 23 23 22 21 20 20 19 None None None None None None 123 98 83 72 64 58 53 49 45 42 39 37 35 33 32 30 29 28 26 25 24 24 23 22 21 21 None None None None None None 142 108 91 79 70 63 57 53 49 46 43 40 38 36 34 32 31 30 28 27 26 25 24 24 23 22 Refinance Break-Even Tables Break-Even Periods (in Months) Term Left on Current Loan: 300 months Term on New Loan: 30 years Points: 0.00% Income Tax Bracket: 40.00% Points and Costs: Paid in Cash Other Closing Costs as a Percent of Loan Amount Interest Rate 25% Reduction 5% 75% 1.00% 1.25% 1.50% 1.75% 2.00% 2.50% 3.00% 3.50% 4.00% 0.125% None None None None None None None None None None None None 0.25% 23 55 None None None None None None None None None None 0.375% 14 30 48 72 None None None None None None None None 0.5% 11 22 33 46 60 77 99 None None None None None 0.625% 79 111 None None None 17 26 35 45 56 67 0.75% 61 81 14 21 29 36 44 53 104 135 None 0.875% 51 65 12 18 24 31 37 44 82 100 121 1% 44 56 11 16 21 27 32 38 68 82 97 1.125% 38 49 10 14 19 24 28 33 59 71 83 1.25% 34 43 13 17 21 25 30 52 62 72 31 39 1.375% 12 15 19 23 27 47 56 65 28 35 1.5% 11 14 18 21 25 43 51 58 26 33 1.625% 10 13 16 19 23 39 46 53 24 30 1.75% 12 15 18 21 36 43 49 22 28 1.875% 11 14 17 20 34 40 46 21 26 2% 11 13 16 18 32 37 43 20 25 2.125% 10 12 15 17 30 35 40 19 23 2.25% 12 14 16 28 33 38 18 22 2.375% 11 13 15 27 31 36 17 21 2.5% 11 13 15 25 29 34 16 20 2.625% 10 12 14 24 28 32 15 19 2.75% 10 12 13 23 27 31 15 18 2.875% 11 13 22 26 29 14 17 3% 11 12 21 24 28 13 17 3.125% 10 12 20 23 27 13 16 3.25% 10 11 19 23 26 13 16 3.375% 11 19 22 25 12 15 3.5% 11 18 21 24 12 14 3.625% 10 17 20 23 11 14 3.75% 10 17 20 22 11 14 3.875% 10 16 19 22 11 13 4% 16 18 21 314 Refinance Break-Even Tables Break-Even Periods (in Months) Term Left on Current Loan: 300 months Term on New Loan: 30 years Points: 1.00% Income Tax Bracket: 40.00% Points and Costs: Paid in Cash Other Closing Costs as a Percent of Loan Amount Interest Rate 25% Reduction 5% 75% 1.00% 1.25% 1.50% 1.75% 2.00% 2.50% 3.00% 3.50% 4.00% 0.125% None None None None None None None None 0.25% None None None None None None None None 0.375% 59 90 None None None None None None 0.5% 39 53 68 87 116 None None None 0.625% 30 73 87 103 124 40 50 61 0.75% 25 57 66 76 86 32 40 48 0.875% 21 47 54 62 69 27 34 40 1% 18 40 46 52 59 24 29 35 1.125% 16 35 41 46 51 21 26 31 1.25% 14 32 36 41 45 19 23 27 29 33 37 41 1.375% 13 17 21 25 26 30 33 37 1.5% 12 16 19 23 24 27 31 34 1.625% 11 14 18 21 22 25 28 32 1.75% 10 13 16 19 21 24 26 29 1.875% 10 12 15 18 19 22 25 27 2% 12 14 17 18 21 23 26 2.125% 11 13 16 17 20 22 24 2.25% 10 13 15 16 19 21 23 2.375% 10 12 14 16 18 20 22 2.5% 11 14 15 17 19 21 2.625% 11 13 14 16 18 20 2.75% 10 12 14 15 17 19 2.875% 10 12 13 15 16 18 3% 10 11 13 14 16 17 3.125% 11 12 14 15 17 3.25% 10 12 13 15 16 3.375% 10 11 13 14 16 3.5% 10 11 12 14 15 3.625% 10 12 13 15 3.75% 10 11 13 14 3.875% 10 11 12 14 4% 315 None None None None None 111 86 72 62 55 49 45 41 38 35 33 31 29 28 26 25 24 23 22 21 20 19 19 18 17 17 16 None None None None None 149 105 86 74 65 58 52 48 44 41 38 36 34 32 30 29 28 26 25 24 23 22 22 21 20 20 19 None None None None None None 128 101 86 75 67 60 55 51 47 44 41 39 37 35 33 31 30 29 28 27 26 25 24 23 22 22 None None None None None None 164 119 99 86 76 68 62 57 53 50 46 44 41 39 37 35 34 32 31 30 29 28 27 26 25 24 Refinance Break-Even Tables Break-Even Periods (in Months) Term Left on Current Loan: 300 months Term on New Loan: 30 years Points: 2.00% Income Tax Bracket: 40.00% Points and Costs: Paid in Cash Other Closing Costs as a Percent of Loan Amount Interest Rate 25% Reduction 5% 75% 1.00% 1.25% 1.50% 1.75% 2.00% 2.50% 3.00% 3.50% 4.00% 0.125% None None None None None 0.25% None None None None None 0.375% None None None None None 0.5% 77 100 None None None 0.625% 55 67 80 95 113 0.75% 44 52 61 71 81 0.875% 37 43 50 58 65 1% 32 37 43 49 55 1.125% 28 33 38 43 48 1.25% 25 29 34 38 43 26 30 34 39 1.375% 22 24 28 31 35 1.5% 21 22 26 29 32 1.625% 19 21 24 27 30 1.75% 18 19 22 25 28 1.875% 16 18 21 23 26 2% 15 17 19 22 24 2.125% 14 16 18 21 23 2.25% 14 15 17 20 22 2.375% 13 14 16 19 21 2.5% 12 14 16 18 20 2.625% 12 13 15 17 19 2.75% 11 13 14 16 18 2.875% 11 12 14 15 17 3% 10 12 13 15 17 3.125% 10 11 13 14 16 3.25% 10 11 12 14 15 3.375% 10 12 13 15 3.5% 10 11 13 14 3.625% 10 11 12 14 3.75% 11 12 13 3.875% 10 12 13 4% None None None None 143 92 73 62 54 47 43 39 36 33 31 29 27 25 24 23 22 21 20 19 18 18 17 16 16 15 15 14 316 None None None None None 105 82 68 59 52 47 43 39 36 34 31 29 28 26 25 24 23 22 21 20 19 18 18 17 17 16 16 None None None None None 119 91 75 65 57 51 46 43 39 36 34 32 30 28 27 26 25 23 22 22 21 20 19 19 18 17 17 None None None None None None 111 90 77 67 60 54 50 46 42 40 37 35 33 31 30 28 27 26 25 24 23 22 21 21 20 19 None None None None None None 136 106 89 78 69 62 57 52 48 45 42 40 38 36 34 32 31 30 28 27 26 25 24 24 23 22 None None None None None None None 125 103 89 78 71 64 59 55 51 48 45 42 40 38 36 35 33 32 31 29 28 27 26 26 25 None None None None None None None 148 118 100 88 79 72 66 61 57 53 50 47 45 42 40 38 37 35 34 33 31 30 29 28 27 Refinance Break-Even Tables Break-Even Periods (in Months) Term Left on Current Loan: 300 months Term on New Loan: 30 years Points: 3.00% Income Tax Bracket: 40.00% Points and Costs: Paid in Cash Other Closing Costs as a Percent of Loan Amount Interest Rate 25% Reduction 0.125% 0.25% 0.375% 0.5% 0.625% 0.75% 0.875% 1% 1.125% 1.25% 1.375% 1.5% 1.625% 1.75% 1.875% 2% 2.125% 2.25% 2.375% 2.5% 2.625% 2.75% 2.875% 3% 3.125% 3.25% 3.375% 3.5% 3.625% 3.75% 3.875% 4% None None None None 87 66 54 46 40 36 32 29 27 25 23 22 20 19 18 17 17 16 15 14 14 13 13 12 12 12 11 11 5% None None None None 104 76 61 52 45 40 36 33 30 28 26 24 23 22 21 19 19 18 17 16 16 15 14 14 13 13 13 12 75% 1.00% 1.25% 1.50% 1.75% 2.00% 2.50% 3.00% 3.50% 4.00% None None None None 127 87 69 58 51 45 40 37 34 31 29 27 25 24 23 22 21 20 19 18 17 17 16 15 15 14 14 14 None None None None None 98 78 65 56 50 45 41 37 34 32 30 28 26 25 24 23 22 21 20 19 18 18 17 16 16 15 15 None None None None None 112 86 72 62 55 49 44 41 38 35 33 31 29 27 26 25 23 22 21 21 20 19 18 18 17 17 16 None None None None None 129 96 79 68 59 53 48 44 41 38 35 33 31 30 28 27 25 24 23 22 21 21 20 19 19 18 17 317 None None None None None 154 106 86 74 65 58 52 48 44 41 38 36 34 32 30 29 27 26 25 24 23 22 21 21 20 19 19 None None None None None None 117 94 80 70 62 56 51 47 44 41 38 36 34 32 31 29 28 27 26 25 24 23 22 21 21 20 None None None None None None 146 111 93 80 71 64 59 54 50 47 44 41 39 37 35 33 32 30 29 28 27 26 25 24 23 23 None None None None None None None 130 107 92 81 73 66 61 56 52 49 46 43 41 39 37 35 34 33 31 30 29 28 27 26 25 None None None None None None None 156 122 104 91 81 74 68 63 58 54 51 48 46 43 41 39 38 36 35 33 32 31 30 29 28 None None None None None None None None 140 117 102 90 82 75 69 64 60 56 53 50 48 45 43 41 40 38 36 35 34 33 32 31 ...The Mortgage Encyclopedia This page intentionally left blank The Mortgage Encyclopedia An Authoritative Guide to Mortgage Programs, Practices, Prices, and Pitfalls Jack Guttentag “The Mortgage. .. 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