Author Topic: Discounted Payoff of Mortgage  (Read 1523 times)

mikescepaniak

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Discounted Payoff of Mortgage
« on: April 12, 2018, 10:27:11 AM »
I'm all set to pay-off my mortgage early. However, I'm wondering if there's any chance of getting my mortgage lender (Wells Fargo) to accept/offer a discounted payoff. The indication I've gotten from some web searches is that it won't happen. My ability to pay is not compromised, the property is not distressed, and I don't get the sense that the bank is looking to deleverage. Regardless, I figured I'd ask if anyone here has tried such a maneuver.

By paying off my $138,840 balance early, I should save ~$23,778.78 in interest. If the bank were to then turn around and use that cash to issue a new 30 year mortgage at today's higher rates (say, 4.35%), they'd stand to make ~$109,978 in interest on that new loan. That's an additional $86,199.22 in profit for them. Seems quite reasonable that they'd be willing to offer up a lower payoff amount to me in order for them to realize that additional profit.

I'd appreciate getting your thoughts on this. Thanks.


Mike....

YttriumNitrate

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Re: Discounted Payoff of Mortgage
« Reply #1 on: April 12, 2018, 11:30:17 AM »
Wells Fargo may be servicing your loan, but are you sure they the actual loan hasn't been sold to FREDIE or FANNIE?

MaikoTsumi

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Re: Discounted Payoff of Mortgage
« Reply #2 on: April 12, 2018, 11:55:10 AM »
I'm not sure that would even be legal for them to do that as a publicly traded company. The benefit to them is about the same as you finding a penny in the street.

PathtoFIRE

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Re: Discounted Payoff of Mortgage
« Reply #3 on: April 12, 2018, 12:02:02 PM »
Banks do not lend out deposits, they create them when they issue loans. Your mortgage is an asset to them, and paying it off does not free up money to be lent elsewhere.

Another Reader

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Re: Discounted Payoff of Mortgage
« Reply #4 on: April 12, 2018, 12:49:02 PM »
Suggest you read the loan documents.  Likely they state you can repay principal at any time without penalty.  Unlikely you will have grounds for negotiation with the owner of the loan.  As previously stated, wells Fargo is likely the servicer and not the owner of the loan.  Fannie and Freddie own the overwhelming majority of conventional loans.

mikescepaniak

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Re: Discounted Payoff of Mortgage
« Reply #5 on: April 13, 2018, 06:09:36 AM »
Banks do not lend out deposits, they create them when they issue loans. Your mortgage is an asset to them, and paying it off does not free up money to be lent elsewhere.

So, fundamentally, I misunderstood how the bank functions. Further reading I found enlightening:

Thank you for your input, everyone.

Aunt Petunia

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Re: Discounted Payoff of Mortgage
« Reply #6 on: April 13, 2018, 06:38:41 AM »
I had a thought that banks might offer early payoff bonuses to people with low rate mortgages if rates go up substantially. Cynical me thinks that they might instead start making up excuses to call in mortgages though (e.g. Your grass is too long so you violated the terms of the mortgage by not maintaining the property)

Another Reader

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Re: Discounted Payoff of Mortgage
« Reply #7 on: April 13, 2018, 06:49:57 AM »
I had a thought that banks might offer early payoff bonuses to people with low rate mortgages if rates go up substantially. Cynical me thinks that they might instead start making up excuses to call in mortgages though (e.g. Your grass is too long so you violated the terms of the mortgage by not maintaining the property)

In the past, when rates increased dramatically, some banks would comb through their records to see who might have assumed a loan that was not permitted to do so.  That included "subject to" purchases and inherited properties where the owner did not fall under the automatically qualified to assume category.  A lot of people were forced to refinance if they could qualify or sell if they could not.  These days, where all the banks do is service the loans owned by Freddie/Fannie, I don't think that will happen.  Maybe some private investors holding MBS or other loan packages will try this, but my guess is they will face a lot of resistance. 

heybro

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Re: Discounted Payoff of Mortgage
« Reply #8 on: April 16, 2018, 05:43:46 PM »
I love you thinking outside the box!  In today's world, it seems so many things are routine transactional only.  So, if the system is set up for it, it happens like lightening.  But trying to do something offbeat, even if it could benefit both parties, seems a rare and hard thing to accomplish.  Keep thinking like this though -- I'm all for creative ways to destroy a mortgage!

Fishindude

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Re: Discounted Payoff of Mortgage
« Reply #9 on: April 17, 2018, 06:56:41 AM »
You are making your payments as promised and they are making $$ off of you as you pay down the loan.   They would prefer that you keep the loan for it's entire duration so that they receive all of the interest.   Heck, if you are a good credit, they'd probably prefer you borrowed more $$ against the house to extend the duration and increase their income.    There is no benefit to them if you pay it off early, so why would they discount anything?

fixie

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Re: Discounted Payoff of Mortgage
« Reply #10 on: April 17, 2018, 09:42:55 AM »
Mortgage
From the French, I believe:

Mort = Death
gage = pledge

Some banks take that literally.

Can't hurt to ask...

fixie

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Re: Discounted Payoff of Mortgage
« Reply #11 on: April 17, 2018, 09:44:24 AM »
Mortgage
From the French, I believe:

Mort = Death
gage = pledge

Some banks take that literally.

Can't hurt to ask...

mikescepaniak

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Re: Discounted Payoff of Mortgage
« Reply #12 on: April 17, 2018, 09:56:38 AM »
Thanks everyone. I thought it was worth the ask. Heading out now (biking :) to wire the payoff.

heybro

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Re: Discounted Payoff of Mortgage
« Reply #13 on: April 17, 2018, 04:13:35 PM »
OMG, you biked to pay off your mortgage.  I think you just achieved nirvana.