Interesting Offer From Mortgage Company
Question: We received an offer for a refinance at virtually no cost to us from our current mortgage company. I found this quite weird.
Option 1 was to extending our existing mortgage term, thus lowering the payments.
Option 2 was to reduce our existing mortgage term from 317 months to 300 months.
Our current rate is 6.25% and the offer is to reduce our rate to 5.875% at no cost to us. No documentation, appraisal or requalification needed.
Why in the world would they want to do this?
We owe about $73,000 on a home that is valued at approximately $180,000-$200,000.
Answer: I wish my bank would make the same offer on my home equity loan 
. I suspect I could convince them to do so simply by calling and telling them I’m going to move my loan to another bank if they don’t reduce my rate, but I haven’t had the time to try.If you pay the lower payments for the longer term, would you end up paying more in total interest? You mean, I take it, that you would have the same monthly payment but pay off the loan sooner, i.e., obviously pay less total interest? Because they realize that the market is hot right now, and it would be more expensive for them to acquire a new customer than to keep you by lowering your rate.
It’s almost always cheaper to keep an existing customer than acquire a new one. It’s a shame that so few businesses understand this. It’s a good thing that your bank does.
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Filed under: Home Equity Loan
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