Texas power

[hubops]

We would call that an " Open " mortgage - it helped me pay off my first house 1981-87 by putting $ 50 - 150 against the principle on payday, whenever I could. Standard mortgages would allow a paydown once-per-year on the anniversary - and it was often limited to a given % of principle. < 10 - 20 % iirc ? >

"Open Mortgages" were available but not common then - the rates were higher. The stiff penalties were introduced during that crazy era of interest rates in the early 1980's < I was at 18.5 % for a while in 1982 >

The olde standard, to get out of a mortgage was a 3-month interest penalty - in the early 80's new mortgages quickly became ALL the remaining interest ! That same terrible era also saw the advent of short term mortgages ; eg. 3 month ; variable rate mortgages ; weekly payments ; etc John T.

[gfretwell]

I have refinanced a few times before. It really just depends on whether you have an early payment penalty written into your mortgage. Some do, some don't. You need to read before you sign or maybe spend a couple hundred and have your lawyer read it. Personally I would never sign a mortgage that I couldn't pay off early if I came into some extra money. You also want to be sure additional payments come off the principal and not just credited as future payments made early. The faster you can knock down that principal the cheaper your property ends up being. Even cutting a hundred bucks a month off the principal really makes a big difference on the back end. You get that lawyer money back many times over. OTOH if you are just a person who makes the scheduled payments and makes no effort to get out from under the debt, it really doesn't matter.

[Ed Pawlowski]

Maybe. I refinanced a couple of times years ago. The original mortgage had no penalty after 1 year. There were some closing costs but the payback was very quick on that too.

That was 1981 when I relocated and was fortunate to get a low 15% compared to others paying 18%.

[Ed Pawlowski]

I know of one but it is a commercial mortgage in the $1 million range.

[gfretwell]

I told you I don't play commodities but I imagine people who do can tell you some stories. As for the options market, just look at those people who were stuck in a short squeeze on GameStop and they bought on a margin. The thought is you can lever thousands into tens or even hundreds of thousands but you also assume the same kind of risk.

In real life I don't need a better example of stupid financial decisions than Griddy. It happened. Bob had the right answer. If you are going to play this game, you better be watching the market

24/7 instead of just being happy your lights are on without asking how much that costs. These people could have cut their losses by flipping the main breaker right away. That $10 grand or whatever would have bought a real nice whole house generator and had plenty left over.

[gfretwell]

They do it, particularly when rates are really high. I had to shop to get one that didn't have the early payment penalty in the 70s. They also did not want to let you pay down the principal early. I was fortunate to know a person in the Riggs Mortgage Department (my MIL at the time) who looked over my contracts before I signed and marked them up as to how I wanted them to read before I would sign. We found someone who wanted the business enough to go in their drawer and get the contract I wanted. They usually have them, it is just not their first offer. I suspect a contract with a fixed payment schedule is easier to sell. That was my condo. I refinanced twice and paid down the principal every time I had a few extra bucks. An original 30 year note was paid off in less than 10. The last 15 year mortgage I had was actually a smaller payment than the original 30 year. I was doubling up on them most months. That went real fast.

[Scott Lurndal]

The biggest cost is that you're resetting your amortization clock. So you often end up paying more in interest over the life of the loan, even tho the rate is lower.

Far better to just double your principle on each (or even every other) house payment.

You'll save much more over the long run.

[Scott Lurndal]

The "shorts" who were "squeezed" were mainly institutional investors and hedge funds, and yes, many recorded losses - albeit affordable for them; it was simply a hedge that didn't pay off, part of daily business in a hedge fund.

The amateurs who got hurt were, as noted, buying on margin; the same behavior that cause the big crash in 1929.

[trader_4]

So doing the math, if it's a three month penalty and you had a 6% mortgage, getting out would cost you 1.5%. If the new loan is 1% lower, your recover that in 1.5 years. But you'd also have the other associated new loan costs to recover. Bottom line you can still pay off early in Canada to move to a lower rate, but the interest rate differential has to be wider to make it practical. Also timing becomes more important. When you can pay off with no penalty, it makes it easier to shop around for a new loan with low upfront costs that if you have that penalty to contend with. Sometimes here it could makes sense to refinance for 0.5%, typically at 1% it's a no brainer. What happens if you sell the property, same pre-payment penalty? This is interesting because the US is thought of as more of the free capitalism country, Canada more socialistic, buy we have no penalty, you do.

[trader_4]

Mostly agree, but the amateurs that got hurt were not necessarily limited to margin buyers. There are likely dummies that bought it at $400, expecting it to go to $1000. Dummies that bought it at $400 and are still holding it waiting for it to go back so they can break even, etc. This is really bad. It's the first time the internet has been used to flagrantly organize a campaign to manipulate a stock price. And if it expands to more stocks, it's the path to using the internet to destabilize stock prices.

[trader_4]

In other words you have no example of any commodity that went up 100X in just a few days. That's understandable, because it doesn't exist.

As for the options market, just look at those

Like Scott said, those "people" were mostly hedge funds. If not and they are individual investors, then to be shorting stocks it's reasonable to expect that you have some smarts and that you are at risk. And again, even then Gamestop didn't got up 100X, it went up about 20X and that took many days, almost everyone that was short was monitoring their position and had many days to get out. Not so with those TX utility bills.

Sure, I expected that would be your answer. Expecting regulators to prevent this kind of absurd ripoff is too much to ask for. And that is exactly what it was. Or are you going to try to tell us that some power suppliers had legitimate costs that suddenly went up 100X in a day? But at least it's consistent with your 'f*ck the Kurds". This time it's f*ck all the consumers in TX, it's their fault and this kind of abuse of capitalism is OK. Are you living in 1900? Even the barrons of the day back then probably didn't pull this crap.

[Ralph Mowery]

How does a home owner in TX know when the price goes up or down ?

The large company I worked for would get a telephone call years ago telling them that at a certain time the natural gas was going to another rate and to get on the fuel oil.

Does TX do this for each house, or does the rate just go up and the home owner had no idea before the payment statement is sent in the mail ?

Playing the power pricing game is much differnet than the stock market game. Most have to have the electricity no matter the cost, but you set your own limit as to how much you want to risk in the stock market, or not even play it at all.

[Ralph Mowery]

Often times even the new fees will be waved if asked. I wanted a home equaety loan from the place I had a morgage on the house. To start with the bank wanted a fee. I told them as I already had the house financed with them and had not missed a payment in over 15 years I could not see any of those fees, and if so I would check with another bank. They waved the fees.

[Jim Joyce]

They know when they get their bill. There is no other form of official notification. A select few might see/hear something on the news and take action to limit their usage, but most would be oblivious until the bill arrives.

[Ralph Mowery]

So there is no way to know when to limit your power usage or when to switch to your own generator. Sure am glad I do not live in an area where you only get to know the price of the almost necessary items way after you use them.

The only other place I can think of like that would be the doctor or hospital but most of the time insurance will cover you after reach a certain ammount out of pocket.

[trader_4]

I just checked. Since the 80s prepayment penalties have been in illegal in NJ, on fixed rate mortgages, but they are OK on ARM mortgages.

[gfretwell]

I doubt it is the first time, just the worst time. People have been pumping and dumping stocks as long as there were financial yacking groups. I always considered guys like Creamer were a pump and dumper guys. Back when I was dabbling in day trading I used to put in a buy order for a stock as soon as Jim started talking about it and put in a sell order right away at 10% up or more. I usually sold it a few days later. Seldom did the price get much better and it usually went back to where it was or worse. I did get tricked with SHLD because I got too greedy on my sell order. Then it ended up being a wash for some of my other short term trades when it crashed. I am a tad more conservative now and not much short term. The tax laws make it unattractive.

[gfretwell]

These are Texans, they don't think like easterners and they don't want your opinion. My bet is there will be some legal action against Griddy, bills will be cut and there will not be any regulation. It doesn't affect any of us. They chose to be independent. I am going to let them.

[gfretwell]

It is 2021, I bet the spot price of electricity is on the Griddy web site in real time for their customers. (or a link) These folks just didn't bother to look.

[gfretwell]

Do you also have the law that any extra payments go against the principal and not just get credited as an early payment.