Back to Politicking
When fractional loans were first announced I thought TIC owners would be able to forgo the extraordinary hassle of pushing for pro-TIC legislation in a pro-tenant city. I was hopeful the private sector would be able to effectively address the negative aspects of TIC financing like sharing default risk with fellow owners and limited liquidity for those of us who want to sell or pay down our notes. Mortgage brokers and real estate agents enthusiastically predicted that after a year so many banks would be in the game we would have lots of financing options and fantastic rates driven low by competition.
I was wrong.
The rates for fractional loans are onerous. Individuals with stellar credit are being asked to pay a premium for their mortgages. They are being penalized as if they had a trail of deadbeat activity that put them in a high risk category. What kind of residential buyer is today being asked to pay 7.25% interest and higher on a home loan?
Look at these headlines from this week's business news. "30-Year Rates Drop to Low for 2007." (The Washington Post.) "US Mortgage Rates Tumble a Second Week." (Houston Chronicle.) "Slowing Economy Drags Down Mortgage Rates." (CNN Money.) 30-year, fixed-rate mortgages averaged 6.18 percent this week. Many banks have rates as low as 5.75 percent.
But if you are a TIC owner you wouldn't know it.
TIC owners are being asked to pay 1.5% more (or an even bigger spread in some cases) for their money. On a $300,000 interest only loan, a condo owner with a 5.75 percent rate is paying the bank $1437.50 per month. On the same loan, a TIC owner with a 7.25 percent rate is paying $1812.50 per month. The TIC owner is paying $375 more a month. Over five years the TIC owner will have paid $22,500 more. And so on. I don't know about you, but I can think of better things to do with $375 every month than give it to a bank.
There are only two ways forward. One is to wait and hope that the banks will engage in some earnest competition and fulfill the promise of fractional financing. The second is to return to the fray, and start contacting our City supervisors about enacting pro-TIC legislation that will allow more of us to condo convert.
Here is my proposal. I want the City to up the number of units that get selected in next year's condo lottery to 500. Write to your City supervisor and tell him or her that you want the same thing.
I was wrong.
The rates for fractional loans are onerous. Individuals with stellar credit are being asked to pay a premium for their mortgages. They are being penalized as if they had a trail of deadbeat activity that put them in a high risk category. What kind of residential buyer is today being asked to pay 7.25% interest and higher on a home loan?
Look at these headlines from this week's business news. "30-Year Rates Drop to Low for 2007." (The Washington Post.) "US Mortgage Rates Tumble a Second Week." (Houston Chronicle.) "Slowing Economy Drags Down Mortgage Rates." (CNN Money.) 30-year, fixed-rate mortgages averaged 6.18 percent this week. Many banks have rates as low as 5.75 percent.
But if you are a TIC owner you wouldn't know it.
TIC owners are being asked to pay 1.5% more (or an even bigger spread in some cases) for their money. On a $300,000 interest only loan, a condo owner with a 5.75 percent rate is paying the bank $1437.50 per month. On the same loan, a TIC owner with a 7.25 percent rate is paying $1812.50 per month. The TIC owner is paying $375 more a month. Over five years the TIC owner will have paid $22,500 more. And so on. I don't know about you, but I can think of better things to do with $375 every month than give it to a bank.
There are only two ways forward. One is to wait and hope that the banks will engage in some earnest competition and fulfill the promise of fractional financing. The second is to return to the fray, and start contacting our City supervisors about enacting pro-TIC legislation that will allow more of us to condo convert.
Here is my proposal. I want the City to up the number of units that get selected in next year's condo lottery to 500. Write to your City supervisor and tell him or her that you want the same thing.
posted by rp at 7:21 PM
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