Shopping Banks and Interest Rates

by GettingFreedom on July 22, 2009

When we bought our home and the 50 acres it sits on 5 years ago we had to shop banks to find a “situation” that worked for us. Our case was a lot different than most since not only were we first time home buyers, but we were buying a big chunk of land. Throw that in with the fact that we did not have a down payment, so we were needing to borrow 100% of the loan (not necessarily the best choice).

We knew we wanted fixed rates, and we also knew that we absolutely did not want to pay PMI. PMI stands for Private Mortage Insurance, it is added onto your loan if it is over 80% value of the home. We got around having it by splitting our loan into an 80% loan with one bank and then a 20% loan with a local bank. In doing so, our second mortgage came with a higher interest rate and it ballooned (or matured) in 5 years. Which was this month.

Initially we were very worried about the balloon, because at that time anything can happen to our interest rate. 5 years ago we had no idea what the rates would be today. But, with the market being in the state it was in, we were excited to see our rate drop. To our surprise, when it came time to sign the paperwork and renew our loan–our interest rate remained unchanged. What?! We’ve always paid on time, and our credit is spotless.

We decided called around to other banks to see what their rates were–maybe we were getting the best. Wrong! One bank (actually credit union–I’ve already spoke their praises here as well as many other times) offered 2% less! We called our original bank, which is local, and told them that we had their interest rate beat, but we would love to stay with them if at all possible so we wanted to see what they could do.

And you know what? While the credit union offered 5.5%, our local bank offered 5.9%. Close enough for us! Who knew that a few phone calls worth of shopping the rates would be able to save us almost 2% interest?? Now, because our second mortgage isn’t much, in the end it doesn’t make a huge difference (especially since our payment was left the same as when it started)–but it does make some. I plugged everything into a Loan Amortization Chart, and it basically saves us just about 3 months worth of payments. Works For Me–I’ll take what I can get!!

Be sure you know the rates of the banks around you. It could save you money in the process. Shopping banks and Interest Rates Works for Me!

This post is linked to: Works for Me Wednesday

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