House and home

We have been living in this house since 2002. Ten and a half years. We bought the house during the infamous housing bubble, when banks were slap happy with loans. 

Starting a couple of years ago, about once a quarter, large important looking envelopes began arriving by UPS. When I realize what it is, I fuss and fume and throw it away. It is from our mortgage company, encouraging us to refinance what remains of our mortgage with an interest rate that is more than two points below what we have been paying. I have always dismissed it as a bad idea without really knowing why. I just knew I didn't want to tamper with the stability of our original loan. Another envelope arrived a couple of weeks ago.

Last weekend I finally picked up the phone and called the bank to ask them to stop sending the offers. The man who answered the phone agreed to take us off the mailing list, and then slipped in a comment very quickly about why the offer would be advantageous to us. I asked, why would you encourage us to do something that means less money to the bank? Customer retention, he said. That's nonsensical, I thought to myself. Banks succeed by keeping money, not customers.

The seed of doubt was planted. I spoke to my husband, we called for more details, and then sat at the kitchen table putting together the pieces of information we had. We made a few calculations of our own, and then I realized why the bank has been pressuring us now, near the end of the loan, confirming my suspicion that refinancing would be a costly mistake, even though the percentage rate appears to be lower, and even if we paid it off quickly. Loans are structured to pay off interest first and principal last. Of course the loan officers on the phone will not mention that detail.

The comment that gave rise to my doubt was that, with a new loan, continuing to make our same payment, we would save X dollars. After our calculations, my husband and I realized that continuing with our existing loan, we will save twice that amount.

The upshot of a half hour's discussion is that we realized we are closer than we thought to being finished, and I now know why I was right to follow my hunch and throw those offers away. When I reflect on what I have to be thankful for this November, at the top of the list is my husband who, like my father, does not let go of an issue until he is sure he has all the facts needed to make a good decision.