A reader named Mary recently wrote in to ask about my thoughts on getting a mortgage from ING Direct. She’s heard that they have competitive rates and low fees, and is seriously thinking about refinancing her mortgage with them.
I don’t have any firsthand knowledge of ING Direct mortgages, but I was curious enough to go take a look. For starters, it doesn’t look like ING Direct offers traditional, fixed-rate mortgages. Instead, they offer a so-called “Easy Orange” mortgage as well as standard 5/1 and 7/1 adjustable rate mortgages (ARMs).
Inside the “Easy Orange” mortgage
The “Easy Orange” mortgage is a five year, fixed rate loan with monthly payments based on a 30 year payback period. Instead of making monthly payments, however, you make biweekly payments corresponding to half the monthly amount. This accelerates the repayment schedule, and helps you pay off your mortgage early.
At the end of five years, you can re-lock at the then-current rate for another five years. The downside here is that re-locking appears to cost the equivalent of two biweekly payments. The upfront lender costs are all wrapped up into $395 processing fee when you sign your original loan documents.
Inside the “Orange Mortgage”
The “Orange Mortgage” is an ARM that comes in two flavors — 5/1 or 7/1. In other words, the rates are initially fixed for five or seven years, after which time they adjust annually. As above, these loans are amortized over 30 years, and the total lender costs are wrapped up into a $395 processing fee.
Thoughts on ING Direct mortgages
Personally, I’m not crazy about ARMs. Instead, we’ve always used 15 or 30 year fixed-rate mortgages. While I’m aware of the arguments in favor of ARMs, I don’t like the uncertainty associated with them. This is especially true when rates are as low as they have been in recent years.
Speaking of rates, the Easy Orange loan had a 4.25% rate and the 5/1 and 7/1 ARMs were at 4.5% and 4.75%, respectively*. I just checked around, and these rates appear to be fairly competitive. Note, however, that these rates require a 75% loan-to-value (LTV) ratio or less. Thus, you’ll need to come up with a 25% down payment (or have at least 25% equity in the case of a refinance).
As I said above, I don’t have any firsthand experience with mortgages from ING Direct. This is where you come in… If you’ve ever borrowed from ING Direct, please weigh in. Likewise, if you’ve considered using them in the past, but decided against it, I’d like to hear why.
*Note: Rates as of 8/10/09.
Terri: The rate on these mortgages ultimately resets, so you have to be comfortable with that possibility. In other words… Yes, you can re-lock after five years, but it will be at the prevailing market rate.
Can someone help me understand why I wouldn’t want to use an Easy Orange mortgage if I plan to stay in my home? I’ve applied for one of these so I can refi. My plan is to continue to make the same monthly payment I currently make on my 30 yr. 6% fixed so that in 5 years, I will have applied an additional $10,000+ on my principal. Locking in for the cost of two bi-weekly payments sometime in the next 5 years seems pretty reasonable to me. My current loan-to-mortgage is 40%, so I’ve got good equity. What am I missing?
I love ING. Had a 15 year @ 7.2% and went to refi in June. With a balance of 55k most banks didn’t want me….loan too small. BOA wanted 2700.00 for the refi closing! Crunched the numbers and checked out Easy Orange and realized I could pay it off in 5 years. Got 4.2% and control over my property taxes,insurance etc (which I keep in an ING savings account). Total to close this refi…1,235.00, which I will make up for in 4 months by a much lower monthly pymt. And more importantly, this loan will force me to pay it off in 5 years or less.!! I do NOT plan on doing a refi again. This whole process went very smoothly and the closing agent even came to my home.
The mortgages we offer at ING Direct we offer for a reason. (Yes I am an employee). To respond directly to ice’s question about why we offer 5/1’s and 7/1 ARMS instead of fixed loans.
1. We don’t want Customers to be burdened with a 15-30 year loan.
2. Based on our research, Customers tend to move or refinance every 5-7 years.
3. The loans are amortized, so payments are manageable.
3. Orange Home Loans are designed to save Customers money throughout the life of the loan.
4. Customers have options to extend the fixed rate period of the loan.
5. In the event a Customer enters the loan’s adjustable rate period, the adjustable rate is capped, so the rate does not drastically rise to an unmanageable amount.
6. We’re a conservative lender –so we make sure we’re offering the right loan products and amounts to the right Customers.
7. We’ve always been prudent –ING DIRECT never got involved with subprime mortgages.
Responding to some other random comments by above bloggers:
“Dont know if ING Direct will be here”
Response: We meet every regulation set forth by anyone anywhere. We met our deposit goal for the year in the first quarter of 2009. We also do not qualify for a bailout like a lot of banks are getting (IE: Bank of America) because we are an internationally owned institution.
“Points”
Response: We dont offer them.
The other thing that you have to keep in mind is that ING Direct Associates are available 7 days a week 8 am to 8 pm ALL time zones (even in our Loan Department). Tell me you can do that with Wells Fargo, Bank of America, or your local credit union, you simply cant.
Last but not least, responding to Al: You are exactly right, We are for everyone, but if you know you are going to be at your home for 15 to 30 years, then these types of mortgages are probably not for you.
ING EASY ORANGE is nothing but a scam. They have lot of requirements to be qualify But they won’t tell you when you apply for the loan and they approve the loan. couple of weeks later they will tell you your loan is declined. They are running a scam to get the $400 for processing fee(400*million-you do the math). Also their customer service is suck…..
The deal with ING Mortgages is that they don’t sell their loans on the secondary market. To potentially keep a loan on the books for 30 years, the loan has to actually bring in money- the bank needs the interest rate to increase at some point unless the loan gets paid off when the borrower refis, etc.
ING also looks at mortgages like this- many, many people buy a home and get a mortgage, then sell that home or refinance within 5-7 years. If that is the case- if you know that you are purchasing a “starter” home or you know that you will be refinancing once your credit is more firmly established, etc.- then it’s somewhat silly to pay more for a fixed rate.
However, if you know that you will be in that home for more than 5-7 years, then this type of mortgage may not be for you.
The Easy Orange mortgage is also known as a balloon mortgage. There is nothing new or evil about that. Balloon mortgages are designed for short-term needs. You need to be very careful if you want to use it instead of a traditional fixed-rate mortgage. You don’t have to stay with ING when it’s time to relock your rate, but you will pay more to refinance.
The pessimist in me believes we are in for a terrible bout of inflation thanks to Y’obama’s multi-trillion dollar deficits. Us older farts remember the Carter years with 12% fixed rate mortgages and worse. That’s when ARMs became popular.
I have considered using ING Direct and actually recently applied for Easy Orange was rejected, which was totally surprising. My credit score based on ING rejection report is showing at 791 and my wife credit score is more than 800! In addition, we own our current house (no mortgage), have around $100,000 in cash (preparing for down payment), investment in taxable account (around $60,000) and joint retirement account about $100,000 and still was REJECTED!!! Anyway, I think it is reasonable good and competitive rate. One think you have to know about Easy Orange, at the end of the 5 years, you have to PAY OFF the loan or relock for another 5 years. You don’t even have the option to go year to year. I didn’t mind it when I tried to apply and know full well the requirement.
Anyway, let’s compare the rate to see if it competitive (as of August 11th, 2009). Easy Orange rate is 4.25% for 5/1 ARM. And for Orange Mortgage, it is 4.5% for 5/1 ARM. Wells Fargo mortgage rate “traditional” 5/1 ARM is 4.25%. I put “traditional” to make sure the comparison is made against Orange Mortgage rate, instead of Easy Orange rate.
ING also advertised lower closing costs, but I think it is somewhat inflated. It is showing $2,000 for rate buy down. But to compare head to head, I would compare when the rate is the same without points. Thus for the example I gave with Easy Orange and Wells Fargo, the advertised savings in closing costs is inflated by $2,000. But the true head to head is actually between ING Orange Mortgage and Wells Fargo 5/1 ARM, which in this case, Wells Fargo offers lower rate, but may be higher closing costs.
Several things I like about ING are everything done online and no escrow for real estate tax, insurance, etc.
Overall though, I would strongly consider other options instead of simply think ING offers the most competitive rate. I have not find my next house yet, but when I do, I don’t think I will go with ING Direct since I was not approved for Easy Orange and I don’t think Orange Mortgage offers the best rate out there.
I am closing on a HELOC with ING now – no closing costs or any other costs at all to secure a line of credit. I had one before, but I recently refinanced and had to close it. Great loans, easy to work with and no issues other than you need very good credit and a lot of equity in your home. Like others, I am too conservative at this point to go with a 5 or 7 year ARM when I can lock in such low rates for a 30 year fixed. But I had a 7 year arm in my first home when I knew I would be moving in that timeframe and it worked out wonerfully. It all depends on your circumstances.
@RB
“You actually want as much debt as possible in an inflationary environment”
Not with this job market… Save and Pay is what I’m sticking to.
As far as the ING loans, the only reason I could see going with an ARM right now would be if I was purchasing a property to flip or I was looking at a short-term pay-off.
I’d happily lock in now. With all the monetary easing, inflation is DEFINITELY on the way in 2-3 years.
You actually want as much debt as possible in an inflationary environment. Fix it now, and pay back with inflated dollars.
Best,
RB
Rich By 30 Retire By 40
Interesting post.
We refi’ed a little over a year ago into a 15-year fixed at 5.25. Now, we like it, but I admit I’m occasionally tempted by the ING rate and then wanting to sock everything at it. If we were 10 years, I might do it, but at 14, we’re sticking with the fixed.
Our very legitimate, longstanding, wonderful CU for many, many, many years offered only ARMs (5 or so years ago, it introduced fixed), so I don’t know how much one should read into the absence of fixed-rate mortgages at a given financial institution. The ARMs our CU did offer were (and are) very legitimate loans, with reasonable terms in terms of how they reset, etc. (they can only go up 1% every 2 years, so there’s not much risk of a sudden surprise).
LOL: Good question. I think rates are going higher. The savings for the ARM vs. fixed was about 75-100 bp(0.75%-1.00%.) On top of that the much lower closing costs from ING Direct added more value to the savings. I ran several scenarios in two groups – 1) I move in the next 8 years; 2) I payoff my mortgage in the next 7-10 years. I assumed that rates adjusted by the max amount each year (after the 5 year fixed period.) In the worst case scenarios I was breakeven (vs. fixed.) As I decreased the time in either scenario or assumed rates adjusted up less than the max I came out ahead and by a large amount in some cases. The interest savings in year 0-5 and lower closing costs offset potentially higher interest rates in years 5-10. So as long as I move or pay off my mortgage I come out ahead and I plan to do one of the two.
I do have an ING Savings account and was on there looking at their orange savings loan. I have to say that ING is a great website, and provides great customer service. I left them to chase some other higher interest rates, but always missed the easy nature that ING Brings. A friend of mine recently secured an ING Loan, and it was actually through a mortgage broker.
he was very satisfied with the low closing costs, very competitive rate, and ease of use.
I recently refinanced my loan to a 4.875% 30 year. I paid .25% of a point. We feel we are in our house forever, so it made sense to make the move. However, with my trust in the ING name, and the low cost of their closing costs, I would strongly suggest this option to anyone who did not think they were going to need a 30 year fixed (1st time homeowner, growing family, etc). The fact that the rate is so low, the costs are low and you can pay bi weekly for free, are huge advantages. A disciplined person could even pay more and really make up ground when/if they had to refinance in 5 or 7 years, and someone smarter than me cou ld probably calculate the savings of all the above at a 4.25% rate end of 7 years to see what you save over that same time vs a stanard 30 year like me.
I am not a gambling man, so I took the sure bet of my 30 year fixed not knowing what will happen in 5 years from now. But another note, ING says they will simply reset your loan to another 5 year ARM at the market rate. Sounds great to me, of course, we dont know if ING will be here, or what the rate will be….but I do think ING is a solid institution, and suggest anyone interested in this bank should consider it. For whateveer that is worth.
ice: just curious about why someone would chose an ARM loan today. Do you think interest rates are going to go lower, or are you going to finish paying it off within 5 years anyway and just want to get the little extra savings in the ARM rates?
I currently have an ING Direct mortgage and have used them several times (purchase and refi). My experience with them has been great (great customer service, very simple closing [for my refi they came to my house], very competitive rates, and very low closing costs.) The 5/1 ARM vs. fixed (15 or 30) decision is based on personal circumstances, but if you are comfortable with a 5/1 ARM, ING Direct is the best I could find. The closing costs vs. other 5/1 or fixed mortgage providers were thousands of dollars lower and the rates are low with no points. Please let me know if you have other questions.
LOL: Yeah, that seemed strange to me, too. I looked, but couldn’t find any mention of traditional fixed rate options.
I prefer 15-year fixed personally. ING sounds a little fishy here: they don’t offer traditional 15, 30 year fixed mortgages at all? Red flags for me…