Annoying things about borrowing money in this country
Posted on May 6th, 2008 – 10:25 AMBy Kara McGuire
Geez, I always feel like I’m apologizing for not updating poor Ka-Blog as much as I’d like. Believe me, the ideas are stacked to high heaven, but finding the time to write is always the challenge.
This week, on top of my writing for the paper, my parents have been in town in search of a house. They’ve decided that they’d like to retire near the grand kids and miraculously sold a house in the Detroit suburbs in little time. As an editor of mine said when I told him the news, “the housing market has hit bottom.” We’ll see….
So they’re searching for a new abode and told me something I found extremely interesting and annoying– lenders don’t like to make small mortgages. According to their mortgage broker, lenders will charge a higher rate for loans that are less than $70,000. So he suggested they take out a loan that big and invest the rest. Uh, no thanks.
The other thing they can do is “recast” the loan, which means pay off a chunk of the mortgage with some of the cash they’ll have from their home sale, and then have the lender re-amortize the payments so they have smaller payments based on the new loan amount. But the lender will charge for this, of course– a couple hundred bucks according to my Dad.
Any mortgage experts out there who can explain to me why a mortgage company won’t take out a smaller loan without charging an interest rate premium, except because they are greedy?
Another thing to complain about while I’m exercising that muscle? Those credit card checks that come in the mail. These checks are coming fast and furious to my address these days. Is that because creditors know that the more strapped Americans feel, the more they might be tempted or might need to use the checks? Or are creditors worried that people are going to charge less these days and want to entice with teaser rates?
I don’t know, but these checks to me are invitations for identity theft and credit scams, sitting there in mailboxes just waiting to be used. In a perfect world, credit card companies would have to ask me if I want these checks. My answer would always be, uh, no thanks!
10 Responses to "Annoying things about borrowing money in this country"
Regarding the credit card checks, I called my credit card company to tell them to stop sending them to me. There is a 3-week lag time between the call and when they will actually stop, but I haven’t gotten any after that. If the phone call doesn’t work for you, go online for the request, or send via snail mail.
Speeking of greed and annoyance, I tried to make a car payment online and found that they were going to charge $10 extra to process the payment. It has to be cheaper for them to process the payment electronically than to have someone open the envolope and enter the check amount.
I’m definitely trying that. I get them from two cards all the time - and like you, Kara, to me it’s nerve-wracking thinking about how someone could just swipe them from my mailbox (or swipe them from my recycling if I get lazy and don’t shred them) and instantly have access to my credit and identity.
Bummer about your parents’ mortgage woes. Yet another instance of getting punished for having your financial house in order.
Regarding Mortgage: just have your folks take out a 100K+ loan and then do a recast later. Our bank/mortgage processor, for example, charges $250 and it’s a painless process. You may be able to do the recast in month two of the mortgage - meaning you can park the money in a savings account for 30-60 days before you do a recast. So no worries about investments. Each mortgage processor will have their own rules - so get their rule sheet up-front - and compare going directly through a bank instead of a broker. I would imagine no bank wants to deal with the overhead on small mortgage amounts. BTW - this is an old issue - I ran into it myself in 1997.
I had heard in the past that you pay a premium for smaller mortgages and part of that is it takes the same amount of time to process as a larger mortgage so they need to increase the price to justify the effort.
As I mentioned in the previous post I’m having a different issue as I try to combine my current mortgage with my HELOC that I used to remodel and add on to my house. I have great credit, no debt beyond mortgage, lived in my house 18 years and have a family income that would be categorized as upper middle but because I’m self-employed I need to either pay a rate well above market or have 2 years worth of tax returns to prove I can earn a living and make my payments.
regarding Tim’s comment, generally you’re right, but there are too many factors to say that absolutely has to be greed. For some government agencies (and I bet some credit unions), accepting a payment online via a credit card means they have to pay fees to the credit card folks (Visa & MC, I believe), so they try to recoup those costs via online processing fees. For others, they use those to help pay for the startup costs that are inevitable in processing online. HOWEVER, you can bet that a good number of private banks have one of those reasons for STARTING an online fee, but then have greed as the reason for KEEPING it.
But remember, there’s almost always about 3 different ways to pay your bills online. You can have the company draw direct from your bank, or you can have your bank pay the company. There’s also “ACH” checks, which I don’t totally understand, but it’s getting easier companies to use…bottom line - don’t give up and just accept a fee!
Have you checked with a credit union regarding the mortgage? Or just mortgage brokers?
I am going to put my money where my mouth is and contribute it to the the governor’s relection fund.
Regarding ACH - an ACH check is just a paper check converted into an electronic payment which the company accepting the funds pays a very small amount for. At my institution it’s .07 per ACH withdrawn from other institutions and a monthly fee of around $20.
I’d have to say - for the credit card/lenders to charge a fee beyond $2 to accept a payment from a client is absurd. With the volume of payments they’re making a large profit off of the fees. The best way to ensure you’re not paying more and maintaining payment schedules is to request that your lender pull the funds via ACH from your checking account. They pay their bank to guarantee that they receive payment.
It saves in postage and there is no chance of being at fault for late payments.
I am a mortgage Broker way up north!The smaller mortgages are a pain for lenders. I am in NW MN where you can buy a home for 35K and its a nice one belive it or not. We have had a great time finding lenders who would do such a small note but they are there, we work with a few who understand our issues on lower priced homes. Frankly the smaller loans dont make the lenders much money so they charge on the from side (rate) Its not so much the broker but thier wholesale lender who they take “hits” from for the loan size. I even have one who I take “hits’ from becasue we are in MN………
