Re: COFI Option Arm pros and cons? - Posted by Ed Garcia
Posted by Ed Garcia on February 11, 2001 at 18:19:23:
That loan is one of, if not the hot loan, that Washington Mutual sells.
It’s four loans in one.
Personally, I’ve always felt that if rates were up, I’d go adjustable; when they’re down, hook on to a fix. However, you’ve mentioned that your intentions for the property, is to sell it in 2 years. You mentioned that you plan to sell on a lease/option at that time. I don’t know why you’ve predetermined selling in that manner at this time.
With financing so available today, there is no reason to do it. You’ll have underlying financing in you name, hindering your borrowing power. If you go a lease/option, you’ll get full price, but a less quality buyer. Your buyer has already proven that they don’t pay their bills. That statement was not meant to be one of moral judgment, but to be more of a “tell it like it is”, statement.
In any event, if I were going to do a lease/option as you mentioned, then I would do a fixed. I need a constant loan, loan balance, and payment to work from and carry forward in the execution and completion of my sale.
Unfortunately Earl, were talking hypothetically, because we don’t know what your next deal will be and to who. I do know that Washington Mutual uses as a selling point of their loan, to let the next buyer pay for you negative equity position. They’ll tell you that you’re just giving up future equity, don’t buy it. You need to have versatility in the event you should change your mind. You not going to be a happy camper if rates go up and you’re stuck in a high yield loan, or experiencing a negative equity position when you didn’t have to.