Replies

I have to laugh at some of the mortgage ads I hear on the radio. One company (that has the letters Q and L in its name) advertises rates “near historic lows” around 5 3/4%. Then, towards the end of the ad, you hear the APR is actually around 7.5%. This rate difference isn’t a bait-and-switch, but probably due to the fees associated with the loan (e.g., points). I always wondered how long it would take mortgage companies to wake up to the fact that the average American worker moves once every five years. With that kind of built-in turnover, mortgage companies push the return from the loan into the closing costs because they know that most people never hold their loans to maturity. In essence, these high-point loans front-load the profits and rely on mortgage turnover to keep their profits rolling in. Too many people look at the “teaser rate” and pay far too little attention to the APR of the loan.

One more thing: Don't expect your mortgage company to inform you when your loan-to-value ratio falls below 80%. When that happens, most loans allow you to drop your credit life insurance that is often tacked onto your loan. The bank gets a cut of this premium and it is some of the most expensive insurance on the planet. When I was buying some investment property, the lender told me I had to have mortgage insurance because I was putting less than 20% down. I said: "Fine. I'll find my own insurance company and make you the beneficiary." In a surprise move, they more or less said forget it...probably because they weren't going to get their slice of the premium.

Unlikely that they saw a dime from the mortgage insurance, or would have. I've been in the business for 7 and a half years. more likely, they did a "lender-paid" MI program, which is normally a slightly higher rate with no MI, and ate the cost to "shut you up" (no offense intended.)

As far as the first point, yes, you do often have to remind them. Just like I have to remind my car insurance company I am turning 30 this weekend to get my corresponding rate drop.

Credit life insurance is not the same as private mortgage insurance.