A client of mine recently was deciding on what lender to use. She wanted to make sure she received a competitive deal on her new mortgage. I sent her my itemization, and she responded, that while my fees and rates were best explained, and laid out in an easy to read format, she was really trying to hit a lower target rate.
Of course, who doesn’t want the lowest rate in Denver on their mortgage? But at what cost? What do you mean , Ray?
Well, she sent me the other itemization of fees from the “lower rate” lenders. Immediately this caught my attention. The rate was lower, at a COST OF $6K in extra fees. Really ? So , quickly turning my “break even” numbers on, I can say this would take 113 months to recoup the extra expense for the lower rate. How?
$6K extra fees
$53 lower payment
= 113 months before the “lower rate” broke even
That means you lent yourself $6k, and got paid back $53 a month. After 113 months you got paid-back, and that is not even making a return. Are you going to promise yourself to keep your mortgage (not sell or refinance) it for 11 years? I will bet you lunch, you won’t.
I ended up saving her $3K in fees and gotten within .125% of their “lower rate”.
Beware of the “lower rate” lender, and make sure you are working with a lender who explains this to you. It is only then that you have a consultative lender, and not one who sells you “rate”. After all, this is the largest investment you will likely make, so make sure you seek professional advice.
Call or email with questions~
Ray Williams, Branch Manager, Summit Home Mortgage Denver
firstname.lastname@example.org or 303.779.0591 x101