 Note to self: Don’t get a mortgage from a bank that will sell it to another firm. I did, and it cost me a bundle.
It seemed like a no-brainer. Interest rates were historically low, and I had a 9%, 30-year loan on our vacation property. I could refinance for 15 years at a lower rate for about the same monthly payments and save thousands in the process.
My banker was eager to get another piece of my business. We “locked in” a 15-year loan at 4.75%. I was going to be able to pay off the loan in half the time for only an extra $20 per month. Everything looked good until the bank started peddling my loan to a mortgage company in California. Those Californians just didn’t understand my piece of property.
When the would-be mortgage owners saw that I have two houses at my get-away retreat, all sorts of alarm bells rang in their ears.
“Why that’s not vacation property, it’s ‘investment’ property,” they said. “And we charge higher interest for investment properties.”
“It’s just a home on a lake,” I protested. I have a main house connected by a breezeway and porch to a smaller mother-in-law house.
“Yes, but with two homes, you could rent one to someone else,” they said.
“You mean like a motel?” I asked.
“Or like a duplex,” they said.
“Doesn’t it matter that deed restrictions prohibit me from conducting any commercial enterprise on the property, such as a bed and breakfast? Even garage sales are prohibited.”
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“You have two complete houses, and that’s an investment.”
“So how much is refinancing this vacation-investment going to cost me?” I asked with much trepidation.
“Instead you will have to pay 5.25%,” was the reply.
Apparently the 4.75% rate I had “locked in” had just been unlocked.
After discussing our situation, my wife and I decided to go ahead with the loan. At this point, negotiations had been going on for weeks, and interest rates had gone higher than the 5.25%, so we couldn’t shop elsewhere. Reluctantly we agreed to the new rate.
That’s when the other shoe fell.
Our vacation home is on a lake. Apparently Californians assume that any house on any lake needs flood insurance.
The fact the house is on a hill overlooking the lake apparently had no bearing on their decision to require flood insurance. Despite my protests that it would take a flood of biblical proportions to reach the house, I ended up paying nearly $300 for flood insurance I did not need.
“This is why you need a local mortgage lender,” I thought. “If they have questions, they can go look at the property.”
Two weeks after closing, guess what happened? The California mortgage company sold our loan to yet another company.
Note to self: See if new lender will let me cancel flood insurance.
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