Well that depends…no it’s not an automatic answer and yes I set you up…
It’s a math equation folks. Always. Any time we are dealing with this much money, USE MATH! Don’t take my word for it – take my math for it…
First, I will explain the relationship between rate and loan costs. It works like a teeter totter with rate on one side and costs on the other: when one side goes down, the other side goes up and opposite. When both sides are evenly balanced, we have what is called “par”.
Let’s take a look at three examples:
- #1 $402,500 at 3.75% over 30 years (rate side down .25%, cost side up $2500)
- #2 $400,000 at 4% over 30 years (rate and costs evenly balanced)
- #3 $397,500 at 4.25% over 30 years (rate side up .25%, cost side down $2500)
The difference between #1 and #3 is .5% in interest rate and $5000 in closing costs. If you’re a rate shopper, you automatically choose #1 and if you’re a closing cost shopper, you automatically choose #3. But which one is best?
Let’s do the math beyond the closing date shall we?
- #1 has a monthly payment of $1864.04
- #2 has a monthly payment of $1909.66
- #3 has a monthly payment of $1955.46
The difference in payment between #1 and #3 is $91.42 per month. $91.42 times 30 years (360 months) equals $32,911.20. While #1 has $5000 higher closing costs, it ACTUALLY costs over 6 times less to pay back. Do you get a return on your “investment” of $5,000?
I’ll frame up the question like this:
If your financial advisor could GUARANTEE your retirement account would grow from $500,000 to $3,290,000 would you give them all of it or just some of it?
…and that folks is just one of the other differences between me and everyone else. My math is a guarantee and it is tied to what is likely your largest debt you carry in balance and monthly payment total.
Bottom Line: who else out there in mortgage world is having these types of discussions with you? Why would you do business with someone who isn’t looking out for you like this?
#irestmycase
