A few months ago I reached out to a few lenders to refinance my primary residence (which is a 4-plex) and get a mortgage on another investment property purchase. The mortgage broker (Lender A) I ended up choosing offered 3.75% with a 2 point origination fee rolled into the mortgage with closing costs. This origination fee was to the tune of $5,250.
The refinance would occur first, then I got some numbers on the new property purchase from Lender A. He said it was 3.50% with no points, but I would have to pay 2 points for the origination fee out of pocket due at closing. That's strange, I said. How is it that you're offering a lower rate for a non-owner occupied investment property? Shouldn't it be the opposite? Something isn't adding up here. Lender A said that 3.50% was the best rate available but wouldn't allow him to roll in his fee. The fee would've been $3,750 paid out of pocket, due at closing. I promptly told Lender A that I would be choosing another lender. I'm not one to believe lenders should be working for free, but honestly I could not afford that $3,750 and was very uncomfortable with the entire situation.
Fast forward to closing day for the refinance. I go into my attorney's office and sign all the closing documents. Then my attorney comes to the last few pages showing a clause to rescind and back out of the entire deal. This would mean I would have to start the refinance from scratch, but my attorney assured it was the right move. So I did, and promised I would reimburse my attorney for lost time/revenue on their part (which came out to $200-300). The mortgage was not recorded, title insurance could be transferred, everything else including the appraisal could be transferred.
That same day I make a few phone calls to other lenders. Found another mortgage broker who is very reputable in the area. 3.375% on the refinance, NO points. 3.50% on the new purchase, 1 point. Crazy part is Lender B got that pricing from the SAME bank of the original refinance deal.
So from this entire scenario I will be saving approximately $7125 in closing costs and $19,863 in interest over the life of the refinance note.
I think the takeaway is with interest rates being so low at the moment, these lenders think they can take advantage of people who only go through the mortgage process once or twice in a lifetime. Be sure to shop your mortgage and find a lender who is willing to act in your better interest.
For anyone buying or refinancing a home, be careful and good luck out there!
