This week, I saved some homeowners, a lovely couple in California, from making a financial mistake that would have cost them $115,720. Could you be making a similar mistake?
The wife asked my opinion on the Loan Estimate they received from a big national bank you would all recognize. It was a refinance to lower their interest rate and payment.
Her gut instinct said something was off; although, she wasn’t sure what. That’s when she reached out to me.
A close look revealed that the refinance was going to save them $47 per month. That adds up to $564 per year, and $16,920 over the life of the loan, 30 years. But wait!
They were already seven years into their loan. And most of the interest is paid in the first five years.
By going backward seven years, this “lower payment” was going to cost them $115,720 more!!!
And for what–to save a paltry $47 per month?
Mrs. Homeowner responded, “How can they do that to people?”
Good question. Her husband was a disabled U.S. Veteran, injured serving our country. How could they, indeed!
Before you jump into a refinance to lower your monthly payment, stop and consider what it will cost you to go backwards to the beginning of a 30-year term.
If you choose to go to a mortgage broker (rather than a bank or direct lender), you could get a customized loan term that won’t require you to go backward at all. That’s right! A mortgage broker can write a loan for 28 years, 27 years, 19 years, any term that makes the best financial sense for you.
If you are in CA or WA, I am licensed in those two states. If you are in AZ or OR, I have a colleague who is licensed there. Thank you.