A couple of weeks ago, this writer told you of keeping the mortgage renewal system honest by getting yourselves a rate guarantee from a competitor, then when you receive the renewal offer from your present lender, simply take the better rate. I came under fire from several lenders saying I was too simplistic in my analogy. The consensus was that existing service should dictate whether the consumer should renew or not. Familiarity with one's mortgage lender should be worth a lot. "Be damned", I say.

I guess I look at things a different way than existing mortgage lenders. It is widely accepted that the mortgage lenders' posted rate (the rate you see advertised every week in the Sun) is simply a benchmark. The posted rate can be negotiated downwards by at least 1/4% by simply asking. If you are purchasing a home, you get to meet the lender's mortgage officer. In most cases, the lending officer will bring up the fact that if you were to ask, the rate might mysteriously come down a notch or two. You obviously would be pleasantly surprised. When you renew a mortgage, you normally do not get to meet a lending officer. The Head Office simply sends the renewal offer directly you, the borrower. If you, the Consumer, had made all your payments on time (which is the trend), you would think that the lending company would offer you their best rate. That is not the case! Most renewals go out at the lenders' posted rate, and not the discounted rate. To me, it makes little sense to offer a new client a better rate than an existing client. It should be noted that if you were to get your renewal, then go in to your lender to discuss the rate, you will probably be given the lower rate. My point though is that you, the renewal client, should not have to displace yourself to be granted the better rate. Your history with this lender should dictate the rate offered on renewal.

I also came under fire for mentioning rate buydown. New home contractors don't want it widely known that lower interest rates can be offered by just about anybody. They would like you, the Consumer, to think that only the builders' foresight has created interest rates that are below current market rates. That is not the case! If you want to advertise your home for sale, in an area where new home builders are offering rates below market rates, you can compete with them on their own terms. You can discuss with your mortgage lender to offer lower interest rates by you prepaying some of the interest on the mortgage you arrange. In other words, if you want to advertise your home for sale, and if you feel that a mortgage rate of 7.25% (three year term) will accent the sale, go ahead and advertise it as such. You must be ready to comply to your ad, if and when someone offers to buy your house. Your lender will allow you to prepay the mortgage interest so that your purchaser obtains indeed a three year term at 7.25%. The cost to you will be the difference between the going rate (8.625%) and the bought down rate (7.25%). As an example, on a $100,000 mortgage, the cost would be $3300. That's not too bad a cost if you were to get full price for your home. The advertised rate of 7.25% will indeed allow you to compete with the new home builders....More on buydowns in future articles.