Random good and bad deals for Oct 9-13, 2006
Posted by Frugal on October 14th, 2006
A short post for recent bad deals for morons or people who have too much money to waste, and some goodies:
- Bank of America is providing free online stock trades for any clients who deposit $25,000 dollars, reviving the www.freetrade.com once provided by Ameritrade.
- AlexsCoupons.com providing coupons to over 1000 online stores. It seems to be a quite popular site with quite high alexa ranking. About 7000-10,000 people everyday visit Alex’s Coupons to save thousands of dollars. Furthermore, the site owner recently donate $2000 to Starlight Starbright Children’s Foundation. Quite a honorable deed, and probably not the first time from what I can find.
Mortgage quotes on Thursday Oct 12, 2006, for refinancing from CountryWide. 30 year fixed at 6.25% rate, 1.0% loan point for 70% LTV (Loan-to-Value) ratio. 15 year fixed at 6.00% rate, 1 loan point for 70% LTV ratio, with unspecified lender fee (didn’t bother to ask).
This compares to Mortgage Capital Associates., providing 30 year fixed at just 0.75% loan point with an okay lender fee of $1250 (was $950 3 years ago, lowest I’ve seen is about $650) at an interest rate of 5.875%. The 15 year fixed is at interest rate of 5.375% of 1.0% loan point.
By the way, paying loan point is usually a stupid idea unless you intend to keep the loan (and not selling your property) for very long time. I’m quoting 1.0% point only because CountryWide by default charges 1.0% point to fatten their pocket while at the same time advertising a seemingly “competitive” rate. Compared to Mortgage Capital, 15 year fixed at CountryWide is 0.625% higher in interest rate (or 11.6% higher), and 30 year fixed is about 0.375% higher (or 6.4% higher). Please do remember that every 1/8 of interest rate worth a LOT more for a longer term loan. That’s the only reason that 30 year fixed seems to have less premium, while in reality, you are probably paying the same 11.6% extra over Mortgage Capital. In terms of actual current dollars (in points), you are probably paying about $5000 for a $300K loan at CountryWide comparing to Mortgage Capital. And all those $5000 goes into CountryWide’s pocket, instead of going towards your retirement or college fund. Maybe they think some 10 (?) hours of loan processing is worth at $500 per hour rate.
You can comparison-shop further at bankrate.com, but do pay attention to the Lender Fee that they will charge (the rest “should” be third-party fee), and sanity-check the customer service experiences at www.bbb.org, and by Google Search with “XXX complaint” or “XXX problem”.
P.S. I personally have not applied to any of the above services. They are merely price quotes, and do not reflect my endorsement to their customer services.
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October 14th, 2006 at 9:16 am
Washington Mutual and the rest is easy…..
October 14th, 2006 at 11:24 pm
Here is the rates from Washington Mutual. Their rates are as TERRIBLE as CountryWide. The points they charge becomes the “origination” point. 30 year fixed is at 6.375%, and 15 year fixed is at 6.000% with 1 point of origination fee.
Larry, please do some homework before you post your comment. Once you find a better deal, you could let people know. But a terrible deal is not good for anyone.
Thanks.
October 15th, 2006 at 2:55 am
wsj has a story on the boa free trade deal. Turns out its a rotten deal from many aspects. Stick with the lost cost brokerages for now.
October 15th, 2006 at 10:51 am
Frugal: there is no doubt that goods and services, acquired over the internet, on balance, are cheaper than those involving direct contact.
That being said, I am against the purchase of a 30 year fixed rate loan.
Now, with a relationship with a direct lender, WAMU, it is very possible to negotiate down (or out) the origination fee. Also, a rule of mine on my weekly mortgage update each Saturday.
Now, for comparison’s sake, I am in the process (coincidentally)of refinancing a SFR rental in Arrowhead Ranch with WAMU: 5-1 I/O ARM quoting a 5.75% (locked) and a 6.849% APR compared to Mgt Cap @ 5.75% and a 7.151 APR for owner occupied. WAMU won that one, hands down.
October 15th, 2006 at 7:49 pm
Sanjay. Thanks for your input. I wonder whether you can give me more details.
October 15th, 2006 at 8:07 pm
Larry,
You probably have a long relationship with WAMU. If your deal is not available to most other people, it’s not helpful.
I’m simply doing apple-to-apple comparison. Using 15/30 years fixed is a very good data point. If you can beat on 15 or 30 years fixed, usually you can beat on other types of loans. Other types of loans have other misc. that you need to pay attention to, such as the margin rate, or type of index, etc.
I’m not sure what you meant by 5/1 I/O ARM. At Mtg Capital, the rate for 5 year fixed ARM is 5.25% for 1.0% loan point, or 5.625% for 0 point. I think it’s better than 5.75% even assuming that you got WAMU to waive 1.0% origination point for you.
Not sure where you get those numbers from. Maybe you could cut & paste the link?
The 15 year fixed with 1 point was 5.375%. Why wouldn’t you get a longer term fixed, when the 5 year fixed is at 5.25% for a tiny fraction of 1/8 interest (or in your case, 5.75% even higher for a shorter term)?
Mtg Capital is not the only lenders out there. If you use Costco lending services, theirs is almost as good as Mtg Capital when I compared 3 years ago.
October 15th, 2006 at 8:15 pm
http://www.mtgcapital.com/ratesheet-fixed.html?state=ca&rs=fixed&r=1
October 15th, 2006 at 8:16 pm
http://www.mtgcapital.com/ratesheet-interestonly.html?state=ca&rs=interestonly
Interest only, 5 year zero points = 5.75%
October 15th, 2006 at 8:38 pm
The interest only loan at Mtg is truly a zero point. The only fees due to Mtg is the lender fee of $1250, and the rest is third party fee.
WAMU has 1.0% origination point. So it is not an apple-to-apple comparison. An more equivalent way of comparing WAMU and Mtg is use 1.0% point for Mtg which will give you 5.375% interest rate, much lower than WAMU’s 5.75%.
I’m sure there are other details that cannot be shown. But the comparison of Mtg at 5.375% and WAMU’s 5.75% is fairly apple-to-apple I think.
October 16th, 2006 at 7:00 am
Does Offer for Free Trading Pay?
Bank of America Brokerage Pitch Is Convenient, but Ties Up Funds
October 14, 2006; Page B1
There’s a new free-trade zone in the U.S. Now, you’ve got to figure out whether you want to do business there.
On Wednesday, Bank of America started giving away up to 30 free online stock trades per month to anyone with at least $25,000 in one of the bank’s deposit accounts. The offer’s good in 10 Northeastern states and will roll out nationwide by February. Several of the bank’s competitors saw their stock prices drop, reflecting investors’ sense that Charles Schwab, E*Trade and the like will have to match. Almost immediately, both declined to do so. We’ll see.
So what’s behind the price cut? Big banks want more customers to house their investments there, too. Meanwhile, online (and old-fashioned) brokers are trying to persuade more customers to borrow mortgage money and conduct everyday checking with them, too. The question for consumers is whether the convenience of doing everything in one place is outweighed by lower interest rates or higher fees.
To answer it for Bank of America, check some of the finer print in its offer: The only free trades are the ones you make online; you can’t use a broker. Then, you need a cumulative total of $25,000 in “deposit” accounts. Your stocks and mutual funds don’t count. Here’s what will: checking, savings and bank money-market accounts; certificates of deposit; small-business deposit accounts; and individual retirement accounts that only contain FDIC-insured products like CDs.
It’s a long list, but $25,000 is a lot to keep in cash-like vehicles. That’s particularly true given that Bank of America doesn’t offer the highest interest rates in the land. If you could do one-half of one percentage point better anyplace else, in a year you’d lose $125 for every $25,000 invested at the bank.
That $125 would pay for a dozen or so trades at many of Bank of America’s competitors. Given that over half of all brokerage customers make five or less trades per year, according to Dan Schatt of research firm Celent, they’d do just fine by staying put.
For those who buy and hold mutual funds, it’s worth considering another factor: While stock and exchange-traded funds qualify for the free trades, not all mutual funds do. BofA’s brokerage arm lets customers trade over 1,200 funds free, though here too it isn’t the most generous industry player.
Still, active stock traders who, for whatever reason, need or want to keep lots of cash on hand, could benefit here. Also, a cash-hoarding investor who also rebalances a portfolio stocked with ETFs twice each year might save money on those trades. Then again, they could make more by going elsewhere and setting up an online savings account for their cash that pays more than Bank of America does on its accounts.
Tim Maloney, president of the bank’s investment-services group, says he figured that people would look solely at the stock-trading aspect of the bank’s move at first. “But this is more about long-term customer relationships,” he says, with “those that will appreciate the breadth and depth of what we offer and want to consolidate.”
Indeed, the bricks, the mortar, the history and the long list of bank services offer convenience and a degree of comfort. The question you have to ask yourself is whether they will make you more money
http://online.wsj.com/article/SB116076989611892216.html
October 16th, 2006 at 7:03 am
WAMU cahrges no origination and no points for their entire array of ARMs.
October 16th, 2006 at 9:34 pm
Thanks Sanjay for the extra info. Actually, it’s not as bad as I thought. It’s some $25K that you need to have it tied up, but for bigger portfolio, it can be economical indeed.
December 19th, 2006 at 1:50 am
If buying loan point is a stupid idea, what about selling loan point? Say i’m buying a house to flip. I don’t want to pay any closing cost. I want free money from my lender, which i’m willing to paying higher interest. I intend to fix the house up and flip it in a three months period. If I want to keep the house to rent, then I’ll refinance using a HELOC. Most Heloc has no fees whatsoever.