Question: Ranchland in tracts of 150 acres to 2000 acres, unimproved, for $100 per acre. Owner will carry with 10% down on most. Excellent air and water quality, very remote, mountains and spectacular canyons. See high mountains of Del Carmen wilderness and Big Bend National Park from your own private mesa. Many tracts with frontage on Isinglass Canyon.

Answer: I’m considering refinancing for the third time in 3 years. I currently have a 1Yr adjustable-rate mortage at 5% which will be “adjusting” shortly. I’ve been quoted a 0 point, no-closing cost 1yr ARM at 4.75%. The only cost to me is the $45 credit report. On paper its a no-brainer, I should do it again. What I can’t figure out is why any lender would be willing to write such a loan. What’s to stop me from doing this every year and getting the new “teaser” rate. The first time we refinanced, in 1992, no one would write a 0 pt ARM, so we got a 0pt 8% 5 year Ballon. In 1993, we were able to get the current 5% with 0 pts, but couldn’t find anyone who would do no closing costs. In each of the first two cases we had to pay about $1200 in closing costs, which took between 7-8 months to recoup. Now I can get the no closing cost loan, I save money immediately.

My instinct says there’s got to be a catch, but I can’t find it.

What’s wrong with this picture? that’s a good question. I think if you look around at other lenders you’ll find the ARMS at a lower rate with closing costs extra. What the lender has done, is bump up the % of the ARM, with maybe a more profitable index, so that he gets paid in cash on the difference between the “ask” on the secondary market and your %.

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