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Ridiculous questions from mortgage lender

Home Mortgages and Home Buying Ridiculous questions from mortgage lender

  • Avatar afan 
    Participant
    Status: Physician
    Posts: 89
    Joined: 05/07/2017

    Not many people have mortgages with after tax interest costs lower than the after tax returns on intermediate term T bonds. Since these have locked in rates once you buy them and are guaranteed to pay the promised rate, they are an appropriate comparator to a fixed rate mortgage. If you are paying less after tax, than you are making, after tax, on your high quality fixed income investments of the same duration, then you should not pay down the mortgage. In effect, your bond interest is paying the mortgage interest with profit left over.

    Since banks make money on mortgages, this only occurs if you took out a loan when rates were low and interest rates subsequently rose. For most people the mortgage does not offer this arbitrage opportunity.

    So most people are better off financially paying down the mortgage.

    #235230 Reply
    Liked by Tangler, Zaphod, Tim
    Avatar EntrepreneurMD 
    Participant
    Status: Physician
    Posts: 332
    Joined: 06/10/2019

    I had a similar awkward experience with my HELOC application, with a large bank. They told us they had to call our employer to verify our incomes. We told them we are the employer and none of the staff new our incomes. They said they had to call anyway. Also, the house was appraised over 1000 sq ft less than it was, so they had to redo the appraisal.

    This is because new rules were put into place after the 2007-2008 financial crisis and the underwriters can be held personally liable for not crossing their T’s or dotting their I’s.

    We do almost all of our banking now with the local credit unions. Relationships make all the difference. We know their higher ups, and it is much, much easier especially after having a nearly 15 year track record with them. I got at least two 7 figure loans with much less hassles this way.

    Amen WCI, only take out loans if you have to. If you do, it is important to have an army of supporting documents prepared in advance and follow-up regularly if the application process stalls. Expect plenty of odd questions and clarifications if the lender doesn’t know you well and/or decisions are primarily made remotely.

    Click to expand…

    you seem to love to borrow money. Borrowing money against your house, borrowing money against your cars, taking out 7 figure loans, to invest into your very lucrative business no doubt… it takes an entrepreneur to think outside of the box right?

    Click to expand…

    Thank you fatlittlepig for your sincere feedback.

    Most recently, I borrowed against the cars, house and took out a commercial loan to help finance the construction of my current office building. It houses our own medical business, as well as several medical tenants.

    #235236 Reply
    Avatar Kamban 
    Participant
    Status: Physician
    Posts: 2487
    Joined: 08/01/2016
    You’re thinking of it in just a financial perspective only. There’s more to it than that. None of us here are 100% financially efficient and we all have our reasons for deviating.

    Click to expand…
    If they are not, they must just be making emotional decisions and have too much loss aversion.😉…

    Click to expand…

    Even when I knew that taking out mortgage with low interest rates and using the money to invest in the stock market long term that I was almost certain to come out ahead at 20 years, I am still building a house with cash saved over years. Why.

    1. I am already FI. I have enough money for my child’s education and inheritance, charity and our retirement why should I try to chase more money that will be meaningless when I am gone.

    2. I cannot be bothered to answer stupid questions and produce stupid documents at this stage in my life.

    3. I want to simplify my life, especially bills that are due each month. I want to travel and not have to keep track of multiple bills after I retire. Even when I had mortgage paid on autopay 15 years ago, I used to get mail on and off stating that I had not paid the mortgage due along with some threatening statements. I hated that and wasted time calling and clarifying it.

    I understand others are different but I now know why retirees want to buy houses for cash and be free and clear, even if they could get a mortgage easily.

    #235237 Reply
    birddog birddog 
    Participant
    Status: Physician
    Posts: 33
    Joined: 02/05/2019

    Sorry this happened to you.  I used my local credit union for my most recent mortgage and the process was much better/smoother than a big bank.  I had a personal loan officer who was salaried and didn’t make commissions off of selling products.  I had his direct number to call (or his personal email address as well to write) with any issues.  Within the first year of having the mortgage, interest rates had dropped by 0.75%.  I inquired and they offered to decrease my mortgage interest rate (without doing a formal refi or changing anything else in my mortgage) for $1500-ish (basically pays for itself in 6-7 months).  May be a consideration in the future to look into a local credit union who exists for its members instead of shareholders as with a giant bank.

    #235241 Reply
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 3071
    Joined: 09/18/2018

    @Kambam,
    Your position is fundamental to sound decisions.
    BEFORE even considering returns, consider risk.
    Capacity
    Tolerance
    Need

    It takes all three before considering an investment return. Since you don’t need it, no loan. Smart choice.
    For the life of me, I cannot understand borrowing on cars for a commercial building loan. To each his own.

    #235242 Reply
    Liked by Tangler, Kamban
    fatlittlepig fatlittlepig 
    Participant
    Status: Physician
    Posts: 1195
    Joined: 01/26/2017

    I had a similar awkward experience with my HELOC application, with a large bank. They told us they had to call our employer to verify our incomes. We told them we are the employer and none of the staff new our incomes. They said they had to call anyway. Also, the house was appraised over 1000 sq ft less than it was, so they had to redo the appraisal.

    This is because new rules were put into place after the 2007-2008 financial crisis and the underwriters can be held personally liable for not crossing their T’s or dotting their I’s.

    We do almost all of our banking now with the local credit unions. Relationships make all the difference. We know their higher ups, and it is much, much easier especially after having a nearly 15 year track record with them. I got at least two 7 figure loans with much less hassles this way.

    Amen WCI, only take out loans if you have to. If you do, it is important to have an army of supporting documents prepared in advance and follow-up regularly if the application process stalls. Expect plenty of odd questions and clarifications if the lender doesn’t know you well and/or decisions are primarily made remotely.

    Click to expand…

    you seem to love to borrow money. Borrowing money against your house, borrowing money against your cars, taking out 7 figure loans, to invest into your very lucrative business no doubt… it takes an entrepreneur to think outside of the box right?

    Click to expand…

    Thank you fatlittlepig for your sincere feedback.

    Most recently, I borrowed against the cars, house and took out a commercial loan to help finance the construction of my current office building. It houses our own medical business, as well as several medical tenants.

    Click to expand…

    if that’s true, it’s very unwise, foolish.

    #235247 Reply
    Liked by Tangler
    Avatar EntrepreneurMD 
    Participant
    Status: Physician
    Posts: 332
    Joined: 06/10/2019

    I had a similar awkward experience with my HELOC application, with a large bank. They told us they had to call our employer to verify our incomes. We told them we are the employer and none of the staff new our incomes. They said they had to call anyway. Also, the house was appraised over 1000 sq ft less than it was, so they had to redo the appraisal.

    This is because new rules were put into place after the 2007-2008 financial crisis and the underwriters can be held personally liable for not crossing their T’s or dotting their I’s.

    We do almost all of our banking now with the local credit unions. Relationships make all the difference. We know their higher ups, and it is much, much easier especially after having a nearly 15 year track record with them. I got at least two 7 figure loans with much less hassles this way.

    Amen WCI, only take out loans if you have to. If you do, it is important to have an army of supporting documents prepared in advance and follow-up regularly if the application process stalls. Expect plenty of odd questions and clarifications if the lender doesn’t know you well and/or decisions are primarily made remotely.

    Click to expand…

    you seem to love to borrow money. Borrowing money against your house, borrowing money against your cars, taking out 7 figure loans, to invest into your very lucrative business no doubt… it takes an entrepreneur to think outside of the box right?

    Click to expand…

    Thank you fatlittlepig for your sincere feedback.

    Most recently, I borrowed against the cars, house and took out a commercial loan to help finance the construction of my current office building. It houses our own medical business, as well as several medical tenants.

    Click to expand…

    if that’s true, it’s very unwise, foolish.

    Click to expand…

    Thank you. I’m here to learn from you and others how to make wiser financial decisions moving forward.

    #235343 Reply
    fatlittlepig fatlittlepig 
    Participant
    Status: Physician
    Posts: 1195
    Joined: 01/26/2017

    I had a similar awkward experience with my HELOC application, with a large bank. They told us they had to call our employer to verify our incomes. We told them we are the employer and none of the staff new our incomes. They said they had to call anyway. Also, the house was appraised over 1000 sq ft less than it was, so they had to redo the appraisal.

    This is because new rules were put into place after the 2007-2008 financial crisis and the underwriters can be held personally liable for not crossing their T’s or dotting their I’s.

    We do almost all of our banking now with the local credit unions. Relationships make all the difference. We know their higher ups, and it is much, much easier especially after having a nearly 15 year track record with them. I got at least two 7 figure loans with much less hassles this way.

    Amen WCI, only take out loans if you have to. If you do, it is important to have an army of supporting documents prepared in advance and follow-up regularly if the application process stalls. Expect plenty of odd questions and clarifications if the lender doesn’t know you well and/or decisions are primarily made remotely.

    Click to expand…

    you seem to love to borrow money. Borrowing money against your house, borrowing money against your cars, taking out 7 figure loans, to invest into your very lucrative business no doubt… it takes an entrepreneur to think outside of the box right?

    Click to expand…

    Thank you fatlittlepig for your sincere feedback.

    Most recently, I borrowed against the cars, house and took out a commercial loan to help finance the construction of my current office building. It houses our own medical business, as well as several medical tenants.

    Click to expand…

    if that’s true, it’s very unwise, foolish.

    Click to expand…

    Thank you. I’m here to learn from you and others how to make wiser financial decisions moving forward.

    Click to expand…

    Seems to me you’re constructing a house of cards.

    #235349 Reply
    Liked by Tangler
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 3071
    Joined: 09/18/2018

    Unsolicited advice. Please feel free to discard and call it crap.
    1) If you need leverage, balance the loan with the asset.
    Car – useful life of the car.
    Home – your intended ownership.
    Commercial bldg – conservative estimate before it needs updates or remodel.
    2) Keep person finances and business separate.
    Keep business ventures separate as well.
    Multitude of factors in one or the other can create severe disruptions needlessly.
    3) Judge each venture (including personal and retirement savings) separately.
    By this I suggest, don’t tolerate a loser. Cut it.
    Celebrate success but don’t use pluses to offset minuses.

    For example, is the building turning a profit (or at least cashflow positive? How would it perform without being used?

    Legal entity, product line, location or geographic are simply ways to slice and dice performance. Typically cost allocations are needed to accurately allocate expenses. For example, how much would be charged for building management and paying the bills? I know you think financial analysis is just numbers. It’s giving owner/investors what they need, not what they ask for.
    I doubt you have allocated your time (construction, property taxes to each of the rental spaces. You need to if you think you are making money on them.

    Offsetting a profitable employee in a business has no relation to purchasing a car. Owners equity can be left in a business or distributed. Pretty simple. I would be more impressed with knowledgeable cost detail of the building and the practice. Profit per encounter including the subcontract costs.

    It’s amazing how many assumptions are made that don’t stand up in the light.
    Good luck.

    #235361 Reply
    Liked by Tangler
    Avatar EntrepreneurMD 
    Participant
    Status: Physician
    Posts: 332
    Joined: 06/10/2019

    Tim,

    So you’re saying I should pay more in interest to avoid the risk (you speak of) in my situation? Doesn’t the risk reduction of lower interest rates offset? I blame the Fed for addicting me to 0%!

    My methods have helped to produce many large pluses and few small minuses over the past two decades. I don’t agree it matters an employee vs. a car rather the aggregate financial standing in the end, and in the end my CPA/accountant with all my details feels everything looks good “in the light”.

    I would say your wise advice is very sound for others (definitely not crap) who may not have so much reserve in FI multiple, but I probably have a bit more options to take advantage of to effectively lower borrowing costs at minimal risk and increased reward accordingly.

    Anyway, the 5 year arm against my home resets November 1, and I will pay it off with a CD expiring in October (by design) so the home will no longer have risk attached. Car loan is very small at this point, no big deal.

    My guess is your advice to decamillionaire clients is tailored differently than that for your clients just starting out, and even different situations among decamillionaires. No? I know people with my net worth who have debt equivalent to their net worth (usually the real estate folks). Now I can’t personally stomach that. I still think I’m quite conservative intending to pay off all the debt within the next 3-5 years, probably sooner rather than later.

    Anyway, getting back to the ridiculous question from mortgage lender. I did not get any of these with the recent loans as the lenders fortunately found my finances quite sound. I do however admit I take unorthodox risks, but I would say they are calculated with backup plans for different situations. After all, borrowing at 0-2% and holding reserves at a guaranteed 3% does not feel like rolling the dice.

    I like that you’re a tough accountant to please. You must do a great job at keeping your clients finances safe and surely they greatly appreciate!

    #236102 Reply
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 3071
    Joined: 09/18/2018

    Simply saying, I would not borrow using cars as collateral for a real estate building.

    I wouldn’t oppose a 1.9% loan instead of paying cash. Somehow it’s so tempting. It’s like deserts. Nothing wrong with indulging. But no way would I succumb to the temptation in order to have the cash for the investment in a commercial building.
    Cross collateral issues limit options. The absolute worst is a personal guarantee The more complex the financing, the less flexibility. Scalability and carving out a section limits options.
    It’s more a business concept, rather than the car loans themselves.

    #236127 Reply

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