Post # 1
I was hoping you bees might be able to answer a few questions for me:
1) For the same exact product (ex 30 yrs fixed w/same rate), what is the difference between going with a bank vs. a mortgage broker.
2) What do you think about a 40yr fixed at the same rate as a 30yr? I know we would pay more interest over the period of time, but if we are secure in our house and could save $800 a month by refinancing as well as chosing a 40yr fixed, would you do it?
Post # 3
- Wedding: October 2011 - Bed & Breakfast
1. The difference between a bank and a broker may be huge or nothing at all, depending on how the broker is paid. If you work with a broker who is fee-based, then you pay the broker a set fee and the broker will hunt down every possible loan option to find you the best deal. If you choose a broker who is comission based, the broker gets paid by the lender, meaning the broker has no incentive to track down the best possible deal for you. So in that situation it’s no different than working directly with a bank.
2. No way in hades would I take a 40 year loan. I don’t want to have a mortgage payment after I’m retired and on a fixed income, or have to work longer just to have the income stream to make that mortgage payment. And I don’t want to pay way more interest than is necessary.
Post # 4
One advantage of working directly with a bank is you may get discounts or other incentives on other products from the same bank. So if I were to take out a refi with Suntrust, they would waive minimum balance requirements on my checking account, giving me fee-free checking without forcing me to tie up $1000 or more a month just to bypass the fees (note: not sure what Suntrust is currently offering– just using that as an example). You may also get better rates on CD’s or money markets by moving your mortgage to that bank.
Depending on the bank, your mortgage may be less likely to be repackaged and sold to another lender than one shopped through a broker. This really depends on the bank and if your mortgage is sold, your monthly payment will not change, but your payment address would change (a hassle to reset any electronic payments) and other policies would also change such as what day the payment is officially considered late and is assessed a late fee, or whether the lender accepts credit card payment and, if so, is there a fee for that (for me, this is a big deal because I like using a card to pay my mortgage so I can get airline miles, and pay the card right off, but I won’t do that if there’s a big fee).
As for the 30- vs 40-year note, no way I would take a 40-year note. You would extend the period during which your payments are all interest by about 2 years, which means you are building equity more slowly. It works in theory to pay extra each month, which would be applied to principal and therefore help build equity, but that only works if you legitimately do make those extra payments. That’s a very hard commitment to stick to when money is tight, and too many people take longer notes than they need, intending to pay extra every month, then put that extra money towards something else instead.
Post # 5
@Lovekiss- Makes sense. So loans are still secured using a broker correct?
@Fishbone- Thank you. I got my original mortgage through a bank and it was sold before we even made our first payments. Nothing changed so it wasn’t a big deal to us.
I understand what you both mean in regards to a 40 yr mortgage. I was just thinking with a baby on the way, some ways to save money. I don’t plan on retiring in this home and we already have 100k in equity if we needed to sell it.