All Forum Posts by: Will H.

How long do you plan to own the property? I doubt there is a pre-payment penalty so you can refinance at any time within the next 10 years. Of course, the safest way to own property is with fully amortizing debt; however, 10 years fixed gives you a lot of time. Most people only hold mortgages for 7 years before refinancing or selling. You will most likely refinance anyway when rates dip.

Hi Charles, thanks so much for the thoughtful response.

I plan on keeping the property for the long term. Great! I was hoping to just get some confirmation that I'm thinking about this the right way, so thank you for your input.

Agreed, plenty of time to refinance or lock the rate once it drops.

Have you personally used any ARM products in a similar fashion with success? Any other potential issues that I might need to consider?

Thanks!

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Hey BP!

Anyone care to share their experience/wisdom with using a 10/6 ARM to finance their property? Seems pretty attractive if we are talking about a 10 year fixed rate that's about 1% lower than the current conventional 30 year fixed rates.

I am considering this as an option for my next house hack purchase. My strategy would be to use a 5% down payment on a SFR and am betting that rates will have a high chance of dropping within the next 10 years, which would give me the opportunity to either lock in the lower rate or do a cash out refinance on my other property and pay off the HELOC.

What are your thoughts? Am I understanding/thinking about this the right way or is there something that I'm missing because this seems like a logical move to me. Of course I understand the main drawbacks will be the variable rate adjustable every 6 months, but I ran a worst case scenario for the rate cap, and I should be able to still cover, and if rates end up going much higher after 10 years (I don't think this is likely) so I would be in a sticky situation.

Thank you in advance as always for your responses and time!

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Quote from @Zach Wain:

Will - The CA property tax system is a mess the first 1 yr of home ownership. That is great they are paying them for you, but be prepared to get an escrow re analysis in the coming months from your lender as they may need to collect some more money to get their escrow account back on track. After the first year juggling act is over and your taxes are reassessed, it will be much more dialed in.

Oops, sorry I must have missed this! Thanks so much for the info, Zach! Agreed, CA property tax system is definitely a mess amongst many other things haha. Hopefully no more tax surprises and smooth sailing from here on out.

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UPDATE:

Spoke with the mortgage company and notified them that I received the 2 supplemental tax bills. Confirmed that they would be able to pay both amounts using the money in the escrow account.

Appreciate the help, thank you again for your thoughtful responses!

-Will

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Quote from @Caroline Gerardo:

@Javier Mercado California different than FL

Servicer will not have enough money in the reserve balance to pay the increase in most situations.

Property taxes might have been assessed on old value ten years ago. CA house value $900000 today $5625 is due in December and old amount will be drastically lower. Lender should have told you this was coming. The title report showed the old tax amount and 1.25 times the new sale price is the jump. The lender set up impound on old lower amount.

Servicer can increase your payment for three months to catch up to have enough in there to also pay in the spring. Expect the jump. There always has to be enough in ADVANCE to pay the coming bills.

Thanks for the response, Caroline!

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Quote from @Javier Mercado:

Your Loan Servicer should be receiving these tax bills as well and should pay these for you out of escrow. Depending on how much you have in escrow it should cover the entire payment. You’ll definitely want to give them a call to be sure they received the bills.

Most lenders will have a reserve requirement totaling 2-3 months of taxes/insurance payments.

Lenders typically underwrite and assign escrow based on previous owners taxes. Once properties change ownership taxes usually adjust based on purchase price. Make sure you dont have any shortages in escrow for the adjustments made for 2023 taxes.

Best of luck!

Thanks for the response, Javier!

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Hi there,

Just got 2 supplemental property tax bills for a house I purchased earlier this year in CA.

Anyone know if lenders typically allow the use of the money from an impound/escrow account to pay for these or on my behalf? Based on my calculations, the balance is large enough to more than cover all the bills (including the normal annual property taxes & insurance), but I'm guessing the lender might require a minimum balance to remain in the escrow account.

I also understand that they don't receive these supplemental tax notices and don't include them in their calculations for the monthly escrow amount.

I'll be contacting my lender tomorrow, but was hoping to get a quick answer to ease my mind before then haha.

Thank you in advance!

-Will

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All Forum Posts by: Will H.

Will H. has started 2 posts and replied 7 times.

Post: 10/6 ARM financing with 5% down

Post: 10/6 ARM financing with 5% down

Post: CA Supplemental Property Taxes - How to Pay?

Post: CA Supplemental Property Taxes - How to Pay?

Post: CA Supplemental Property Taxes - How to Pay?

Post: CA Supplemental Property Taxes - How to Pay?

Post: CA Supplemental Property Taxes - How to Pay?