Loan repricing

Discussion in 'Private & Conventional Lending Discussion' started by Corzhens, Sep 24, 2015.

  1. Corzhens

    Corzhens Senior Investor

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    Me and my husband both worked in a bank and we didn't know about loan repricing until we took a mortgage for the house we bought. When we got that loan from my husband's bank, the interest rate was 11% per annum with a repricing after 2 years. When that period lapsed, we were sent a document to sign - to acknowledge the new interest rate that will be in effect for the next 2 years. The rate was 11.5%. Not bad, just slightly higher. When I earned the privilege for a housing loan, we transferred the mortgage from my husband's bank into mine. The interest rate was 9%.
     
  2. JR Ewing

    JR Ewing Super Moderator Staff Member

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    Gotta be careful and always read the fine print or have your attorney read it for you. I really feel bad for some unsophisticated buyers who got suckered into ARM loans years ago and weren't informed or weren't able to understand what they were getting into.
     
  3. Corzhens

    Corzhens Senior Investor

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    I understand your concern. However, the borrower (like us) cannot do anything anymore once the loan contract has been signed. Let's say there is a repricing this year for an increased rate, the only recourse we have is to cancel the loan if we do not agree with the increased rate. That is a sad fact here. But on the other hand, the loan officer said that it is an advantage as well because the rates used are based on the prevailing market prices.
     
  4. crimsonghost747

    crimsonghost747 Senior Investor

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    And this is why it's important to read and make sure you understand everythign BEFORE signing. :p
    Here this is not much of an issue nowadays as most of the mortgages move together with EURIBOR.
     
  5. pwarbi

    pwarbi Senior Investor

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    Surely if the fine print is read and understood, the contract is signed, then you go into it knowing all the facts, and if the terms and conditions do change, it won't come as much as a surprise.

    If there's anything you don't agree to, then don't sign the contract in the first place.
     
  6. Sunflogun

    Sunflogun Well-Known Member

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    Yep, we need to read all the details, be informed and ask questions or else we might get ourselves into unpredictable situations we cannot afford.
     
  7. Corzhens

    Corzhens Senior Investor

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    The loan repricing here is actually not in fine print, it is part and parcel of the contract, clearly indicated in a clause. And there is no way the loan applicant can evade it because it seems to be a standard here. The reason of the bank is the fluctuating interest rate in the market. So if you do not want a loan repricing then you can apply for a short term loan like a term of 2 years which will not involve repricing. But in fairness to repricing, it is a mutual benefit since the borrower is also protected by the market rates since the interest rate repricing can be increased or decreased as well.
     
  8. changed

    changed New Member

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    Here this is not much of an issue nowadays as most of the mortgages move together with EURIBOR.

    __________________________
    123movies
     
  9. longtermbull

    longtermbull Administrator Staff Member

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    As and when US base rates return to "traditional levels" (however long that may be) I think a lot of people who took out mortgages when base rates were low will seriously struggle. Could that eventual situation prompt another housing crisis?
     
  10. JR Ewing

    JR Ewing Super Moderator Staff Member

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    Yeah, these longterm abnormal conditions (such as the fed keeping rates abnormally low for 7-8 years and the govt practicing "affirmative action" lending) that are created by govt intervention result in bubbles and eventual crashes and crises.

    Let's just hope that the next one isn't as bad as what we saw in '08.
     

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