I say this because at my lunch appointment the other day a business associate of mine begins to talk about his recent refinance experience (keep in mind he has no idea about my affiliation to Lighthouse) and how his personal friend, VP of a local bank got him a 3.85%. I was interested but unlike most people it was not because of the rate he received but how and why he came to believe that he got such a good deal.
I nod excitedly so to bait him into giving more info and he gladly does. It turns out that his wife and him were not exactly looking to refinance but they had just talked about needing a cosmetic home improvement. It just so happened that this friend the VP at the local bank called and mentioned that they could get this improvement for FREE if they refinance into a 30 year mortgage. So they paid for the work ($14,000) lowered their interest rate and the best thing according to him is that the monthly payment stayed the EXACT same, hence they got the floors for free.
Now my associate is stuck with at mortgage payment for another 30 years and will be paying 3.85% on this improvement for 30 years as well. What he should have been advised is that a 15 year mortgage would have a monthly cost of close to his old payment but rather than the $14,000 addition to the loan they could have saved $100,000 or more by going to the 15 year structure.
Good advise is to talk to at least 3 mortgage professionals before you decide on what to do with your financing. Buying a house or refinancing is often the largest single investment most people will make and should not be done with emotion but rather logic.
No comments:
Post a Comment