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Lowering Mortgage Rate with Hard Work

Posted By Jim On 07/10/2008 @ 12:01 pm In The Home | 2 Comments

I recently had the pleasure of receiving an email from Debrajoy in which she shared a very positive mortgage related story I felt was worth posting because it hit on a lot of excellent points. Essentially the story is about how she lowered her mortgage rate and used other clever techniques to help ease the loan.

However, I think the most important lesson in this note has nothing to do with money. I’ll touch on that after you’ve had a chance to read the note.

Here is something I did to get the best locked rate on our 30 year mortgage:
US Bank offers “No Closing Costs” here where I live in Fort Collins Colorado. So about a year and a half ago, I began hearing stuff on my local NPR radio station that suggests that the interest rates might be going up again. I told my husband that I think we should lock on our interest only loan that we had for about 5 months.

US Bank was offering 5.75% locked-30 year. I contacted another bank and a couple brokers and got them to e-mail me ‘good faith estimates’ on a 30 year refinance at 5.50%. I took it (hard copy) to my banker and asked him if he could match it. (Mind you these estimates had closing costs up the wazoo written into it.) But without even blinking an eye he ‘bested it’ and offered me 5.49%. I came home and told my husband, Bob, “that was too easy”, I’m going to see if I can get better.

So I went thru the process of contacting 2 more (different) brokers and got them to e-mail me good faith estimates giving me a 5.25% interest rate. Now one of these brokers told me “you can get whatever rate you want, you will just pay higher closing costs for it”. I took those “offers” with their closing costs to over $3000.00 (hardcopy, in hand) back to my bank. My husband was embarrassed and said, “I’m not going to go over there with you while you beat those people up”. That is not how I see it, I am not embarrassed to save my husbands hard earned money. I said to him, “the bank isn’t embarrassed to take my money and I have no hesitancy in keeping my money!”

The next morning I approached my favorite banker (who offered me the 5.49%) with papers in hand and said, “Mason, you’re gonna kill me, but I have a better offer and want to know if you’ll match it.” and showed him my 5.25% write up for 30 year fixed.

He was hesitant this time, and said he’d have to ask his manager.

He called me back, at home later that afternoon and was sincerely excited sounding and said that they would give me 5.24%. Needless to say, we locked and have been happy ever since.

Recently I took $15,000.00 of our home loan and put it into another US Bank offer of 1.99% for the LIFE OF THE LOAN with a 3% fee.($450.00) And then I pay it down monthly on autopay, paying $200.00 a month, more than the minimum requirement AND put some money down on the principal of both loans as much as possible (sometimes twice a month). We now have $119,000.00 left on our original $172,500.00 home loan.

And the real kicker here is I learn all this stuff because I’m a news junkie –Love my National Public Radio and read the newspaper and a “professional” saver. I moved into a Christian commune in Chicago (1977) and lived there for 23 years from the age of 19 — never had a bank account, had no credit card — BUT I sure knew how to stretch a dollar. I loved shopping the thrift store and was very good at finding very quality stuff for my family. Our family moved out in 2000 and our credit history must have looked like we just came in from the planet Jupiter. At least we did not have BAD credit.

If there is a bargain out there to be found — I will find it. My Mom tells me that I get more for my money than anyone she knows. And now I found your site and am so happy to have company in the “Festival of Frugality”.

[... some really kind compliments about BFP, etc. ... ]

Please keep up the good work!!

Debrajoy

Lessons:

  1. When Debrajoy got 5.49% right off the bat, her first thought wasn’t “Wow! That’s great where do I sign?” but instead “That was too easy, I’m going to see if I can get better.” That’s a great mindset whenever you’re buying anything, let alone a loan for the next thirty years. You had to work hard for your money, make the other person work harder for your money.
  2. “I’m not going to go over there with you while you beat those people up”. That is not how I see it, I am not embarrassed to save my husbands hard earned money. If you had to boil the entire story down to just one poignant line, that’s the one I’d pick. I know sometimes I’ve been too embarrassed to ask for something because I thought I might look cheap or greedy; but that’s not the point. Why do people do all this work shifting around funds in an online savings account over half a percent of interest and then overspend on something by at least that margin? It’s hard to do and easy to say, but don’t be embarrassed about it. The more you save, the more food you can put on the table.
  3. If there is a bargain out there to be found — I will find it. I was once told of a psychology experiment where individuals were given a ring of one hundred keys and a locked door. Some were told that the key to door was in the ring, others were told the key to the door might be in the ring. In both cases the key was in the ring but the ones that were told the key was in the ring had a much higher probability of actually opening the door before giving up. There is always a bargain out there, you just have work hard enough to find it.

Thanks Debrajoy for sharing that story! If you have a story or a tip or just want to say hello, you can use the contact form [3] or email me directly at the address in the upper right hand corner.


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