Mortgage refinance: Negotiation Pays Big!

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I am at the end of my journey to refinance our house. The papers are signed. Just a few T's to cross and it is done.

We scored, IMO, with a 4.25% - 30 year fixed mortgage.

Here is why the rate is especially important to me.

Over the years I have been loathe to negotiate with the sellers of things I buy. Cars? I am a pushover. Water softeners? I overpaid about $300 for one years ago. The guy was such a good salesman. Appliances? I paid whatever the sticker said.

Now I am older. I am wiser. When I started to look for a mortgage last year I decided to play the numbers game rather than the "isn't she a great banker" game. I told my banker, Jessica, that I would be shopping around for rates. I wasn't trying to be mean, just truthy. Plus, I figured she would work harder for me knowing that I would not buy her mortgage just because.

Toward the end of the search process Jessica truly did have a good rate for me at 4.85% with one point (I would pay 1% of the total amount of the mortgage to get that rate). She also offered 5.35% with no points. That was two weeks ago.

But Jessica made a mistake that she could not forsee. I had all of the papers signed to bring into her office. She needed our homeowner policy declarations page so I stopped by my insurance man's office to get it. Lo and behold, his company, State Farm, offered mortgages at 4.5% that day. When I did the math quickly in my head I decided playing him against Jessice would make for a profitable day.

When I called Jessica I could tell by the tone of her voice that she was miffed. She was already counting her commission when I threw the monkey wrench into the issue. Bad me!

"Let me see what I can do," said Jessica. "Fine!" I said.

Pushing my luck, I called another mortgage company for their rate. Lo and behold! They made an offer of 4.25% with two points. More expensive, for sure, but sure worth considering.

I called Jessica back to tell her the bad news. This time she was resigned to fight to the bitter end.

"Ok," she said, very alert. "I can match that offer!"

I could tell by reading the financial news and by the way all of my mortgage people were talking, that 4.25% was about as good as I could get that day.

So, I told Jessica to redo the paperwork. I was going to buy her latest offer.

"You're sure now?" asked Jessica with a touch of plea in her voice. "You won't change again if State Farm or someone else makes a lower offer?"

I assured Jessica that I would stick with her now. I could sense that she was on thin ice by offering a "lock" on that rate. Later I found out that she had to work hard to get that offer since it did not exist for her going in.

What is the moral of this story?

1. With mortgages, at least, the savings by negotiating fiercely can be very significant. In this case, we will save $40,000 by getting 4.25% instead of the $4.85% over the 30 year term.

2. It makes sense for mortgage bankers and any other businesses to provide their best offer up front. If you don't, be sure to avoid sending your client to pick up information on the way to close the deal.

3. I have a friend who negotiated the price on a washer/dryer at Sears. That guy had moxie!

4. The phone is your friend! When buying things, it is much easier to negotiate vigorously on the phone. In person negotiations can be a pain.

5. Mortgage jokes are not very funny. "If you think no one cares you're alive, miss a couple of house payments."

Photo credit: woodleywonderworks

Greg Cryns
20000 Credit Card Debt
Instant Niche Emails This is a fantastic list building tool. It is an incredibly simple way to create a year’s worth of emails for any niche market literally overnight! (also can also be used to create 52 blogging posts and more!)