 | Chuck Bullock
is the Vice President of Lending at Boeing Wichita Credit Union. He has been involved in Consumer and Mortgage lending for a combined 19 years. During his career, he has been responsible for loan applications, processing, closing, underwriting, appraisals, loan servicing and collections. In his current role, he is responsible for the Consumer Loan, Real Estate, Business Services, and Special Accounts/Collections departments. Boeing Wichita Credit Union is a $321 million credit union, the largest in the state of Kansas. Chuck can be reached at (316) 651-5105. |
Banking & Finance
2003-04-01 11:53:00
Best terms on a mortgage
: We are looking to refinance. Since money is money, isn't the best deal on mortgage refinancing the one that offers the lowest rate, for the longest period, for the least amount of cost?
ANSWER: Without question, this formula makes sense. Being able to obtain the lowest monthly payment with the least closing costs is preferable. By reducing the monthly debt service on your mortgage, you free up available funds to apply toward the reduction of other debt, your savings account, or for other worthwhile purposes. There are four other questions, however, that should be considered.First, how long do you plan on remaining in your current home? If you anticipate moving within the next few years, the total cost of refinancing your existing mortgage may far outweigh the amount you would save as a result of a lower interest rate. With a calculator, take the total costs of refinancing your loan and divide by the amount of monthly savings you've realized. This will tell you how many months it will take to recoup your costs. And, will serve as a good barometer of value. Second, does the "deal" sound too good to be true? All too often, I hear consumers say they can get an interest rate that is far below what the market seems to offer. The old adage "if it sounds too good to be true, it probably is" rings true in mortgage lending. A sub-market rate is typically associated with high closing costs, resulting from either hidden fees or excessive discount points. As a consumer, you can protect yourself by asking your Loan Officer to provide you with a Good Faith Estimate of closing costs before you write them a check for your application fee. By comparing apples-to-apples, you'll be able to determine which is the best deal for you. Third, would you be better off refinancing at a shorter term? On average, you'll find 15 year fixed rate loans to be 50 basis points (or ½ of 1%) lower than their 30 year counterparts. While your payment on a fifteen year loan will be higher than that of a thirty year loan, you'll be pleasantly surprised as to how close the two payments really are. The difference is not that significant. But most importantly, you'll be amazed as to how much you'll save in interest! Again, your Loan Officer will be happy to provide you with a comparison of the two terms. Finally, how well do you know your lender? A great deal can be spoiled by: delays in processing and closing, surprises in interest rate changes, and servicing nightmares. All too often, I hear of situations where the closing was delayed, thus causing the borrower to lose the commitment on their interest rate; of a last-minute interest rate change, not to the consumers advantage; and of problems with the posting of monthly mortgage payments, or delinquent payouts of escrow-related items like real estate taxes or insurance. We are fortunate to have some top-notch local and national lenders represented in Wichita. Many have excellent reputations for customer service and satisfaction. My recommendation is, do your homework. As with any major purchase, take time to shop and compare. The investment in time to find out "who" the mortgage company is will pay big dividends.As you can see, there is an awful lot to consider. Take your time and don't be afraid to ask questions. If you find your mortgage loan officer communicating in "mortgage speak", ask them to explain it in terms that you understand. Making an educated decision is crucial for getting the best deal for you.
