The $100K Mortgage Hack: Save Big on Your Interest Rate

Host, Kristen Ambos: Kristen Ambos: Hey everyone, and welcome back to another Always On Point podcast here with Kristen Ambos from Point Mortgage, your Chief Sales Officer here. And wanted to go over some things today when it comes to interest rates, because if you're watching the news at all, if you're following the Federal Reserve, you see that rates are on the move up again. Now, we might have a little bit of, you know, up and down in the next couple weeks. I think we're all really used to the volatility of the market right now. When I'm recording this, rates are right in between 6.7% and 6.8% on the 30-year fixed national average. You can go over to Mortgage News Daily; they have that average, that's exactly where I'm pulling it from. So, they've been there—rates have been there. And one of the things that we're still hearing of is, you know, people still looking at doing the adjustable-rate mortgage. We talked about this a couple weeks ago, but I wanted to bring it back because I have a specific example of a client that I worked with this week, and what actual strategy looks like. Instead of being a loan officer that just tells you "I strategize," I wanted to prove to you how we strategize together with the client, and what we're going to do to make sure you're saving as much money as you can. And what can you do to get that interest rate down yourself and save a ton of money? So, here goes. These are going to be close approximates, not exact, because no matter what changes—whether it's a credit score by a little bit, down payment a little bit, loan amount by a little bit—these will vary. But it'll give you a really good depiction of how you can get your own credit score down. So, why we looked at this with a client is because rates ticked up. We initially had him pre-approved three weeks ago. He is buying a brand-new construction. That construction isn't going to be done until probably, you know, October, November. Making it difficult to lock in a good rate right now, because interest rates work on lock days. So, what do I mean by that? A lot of consumers don't realize that the shorter the rate lock, the better the rate on typical days. So, what does that mean? Rate locks work typically on a 15-day increment: so 15 days, 30 days, 45 days, 60 days, 75 days, 90 days. There are some lenders out there who will go to 120 days, but again, every 15 days you extend that rate lock, the rate ticks up, or then you start paying points to get the same rate. The reason for that is because your lender—your mortgage bank—is securing that interest rate based on the volatility of what the market's doing. So, even though we're locking in your rate, rates might go up in that 30 days if you're in a 30-day lock or a 45-day lock. So, the longer the lock, the riskier the market. So, it's called risk-based pricing, is another way. Risk-based pricing, without getting too far into the weeds, is the higher your credit score, the lower the risk-based pricing, meaning no adjustments to the interest rate. If your interest rate is a little lower, you're going to have pricing adjustments to that rate because the risk of your score being lower. Same thing with down payments. Now, whenever you change your down payment by 5% or more, that might change your risk-based pricing. So, if the par interest rate is 6.75%, and you have a sub-40 credit score, and maybe you're putting 5% down, your interest rate might actually be 6.875% or 6.99%. All depends on, like I said, the total picture. So, in this exact scenario, that was my client's situation, which is why I wanted to just start there. He was able to lock in—and again, we need a longer rate lock because rates are moving up, so we wanted to get him locked in—he needed a longer rate lock to get to closing date. So, that rate was 6.99%. He wanted to come in and talk to me about buying points. We sat down yesterday, we met, we talked about what those points look like. Now, points—just to remind you—one point is equal to 1% of the loan amount. In this case, the loan amount was $309,000. So, that would mean that one point is equal to $3,090. So, he could pay one point to buy that interest rate down, saving him interest and a lower payment—or I'm sorry, yes, well a lower payment, yes, but a lower principal and interest payment, as well as overall lower payment. So, we looked at: what does it look like to buy it down to 6.875%, and what does it look like to buy it down to 6.75%? What we found out is the mortgage spreads right now are so close together that for one point, he could only get down to 6.75%. We did the savings, and while there's a savings there of about $17,000 or so in interest—which would, if you're going to pay $3,000, $3,100, to get a $17,000 savings, because he's going to be in this home for the longevity, it's brand-new construction, they plan on being here probably till pay off. So, we're looking at it for the longevity. So, for him and me, if you're looking at going, "Okay, for $3,000 I can save $17,000 on interest," that's a pretty decent buy. However, I'm still hit-or-miss if that's worth it for a quarter of a percent interest rate. So, we discussed: what does it look like if we just prepay it? What we found was their comfort level was, "Yes, I can afford probably $200 over my payment now that I could pay every month." So, we utilized that $200 from month one and said, "Okay, if I still take out the $309,000 at 6.99%, and I prepay $200 towards my principal every month, what does that save me?" What we found is not only will he pay his loan off in 23 years versus 30, he's actually going to save over $100,000 in interest. So, for a little bit more money a month, we went from a $17,000 savings to over $100,000 for $200 a month. So, what did he do? He's like, "I'm not buying my interest rate down. I'd rather do it on my own." When you buy the rate down, that $3,000 isn't going in my pocket; it is going to the investor who has those interest rates, so Fannie Mae or Freddie Mac. They're charging that risk-based pricing. So, with that being said, he could spend $3,000 upfront to save 1,700—or, he could take $200 a month, pay it off in 23 years, and save over $100,000 of interest, you guys. That's huge, and he now has the ability to do that. And maybe he makes more money someday, now all of a sudden he wants to pay $500 a month. Let me rewind, though, on that $200 a month, and that over $100,000 savings. I put in the same exact loan amount of $309,000 with a 5.375% interest rate, zero additional monthly payment, and it was saving him the same hundred—just over $100,000. So, when he's prepaying $200 a month, he's actually not paying a 6.99% interest rate—even though that's what he's locked in at—because every dollar you prepay on your mortgage interest recalculates that interest rate. So, the true factor: same $309,000, one is a 6.99%, one is a 5.375%. Both of those are based on a 30-year fixed; one gets paid off in 23 years, one gets paid off in 30 years—$100,000+ dollar savings at 5.375%. He couldn't even lock in on that on a 30-year fixed at that rate if he wanted to, no matter how many points he wanted to pay. But he can still get 5.375% even though he's locked in at 6.99%. You heard that right: you yourself can drop your interest rate on your own without paying thousands of dollars of buying a point down. Two years at $200 a month is $2,400. Three years, $3,600. So, for about the same amount of three years that he'd have to pay upfront for that interest rate to buy it a point down, he's actually going to get a much lower interest rate. That's the kind of strategy I'm talking about when I say I sit down with my clients and I strategize the best way to use their money. Because I want to see everyone succeed financially. I want to see every client, everybody succeed financially. And I'm a really big believer—you saw in my last podcast, you saw in... if you follow me on all the social media platforms, whether it's TikTok, Facebook, Instagram, YouTube—you've seen, hopefully, if not, you can go back, you've seen where I've said: stop taking adjustable-rate mortgages for 5.875% and putting yourself in a position where then you're potentially going to have to refinance to a higher interest rate, which many people are doing right now who took adjustable-rate mortgages three, four, five years ago. And now not only are they paying a second set of closing costs to refinance, they're also paying a higher interest rate. Where if they would have locked in on a 30-year fixed three, four, five years ago—or today, assuming rates do tend to go up, that's the plan, that's what the Federal Reserve is telling us right now, that's what all signs are leaning to by any economist in the housing market, is that rates are going to stay flat and/or raise slightly over the next, you know, six months, whatever the case may be—don't hurt yourself. Work with a loan officer who's going to strategize with you. And yes, that adjustable-rate mortgage might have been 5.875% in the example we used in the last podcast. I just told you 5.375% using your own money to save your own money. You're investing in your monthly payment to save a ton of money later on. It is a win-win for you, and it will save you so much money that when you pay that house off early, then you can start contributing that $200 to an investment, to a Roth IRA, to whatever that looks like. Because you're already paying at such a lower interest rate—just because it says 6.99% on the document doesn't mean that's what your true interest rate is. So, sit down and strategize with that. Talk to a loan officer who's going to walk you through that, because saving money is everybody's goal right now. No one knows where to save an extra little bit. But if I just told you I could save you $111,000 in your interest rate, would you listen? Most people would. My client yesterday, without a doubt, looked at me and said, "That's what we're going to do. We're not buying the rate down. Keep us at the 6.99%. Thank you so much for strategizing with me." The other lenders I sat and talked to just talked about how I could buy rates. The other thing I'm hearing a ton of real estate agents calling me on, saying, "Kristen, can you find a better way to put this together? Because the loan officer that they're working with is saying that they need $20,000 to close, and then asking if they can get a seller credit." But sellers don't necessarily want to always give credits, especially if it's a multi—you know, a multi-offer situation. So, how can we work with the client to get those costs down? It's simple: you don't buy points. You don't have to buy points to get a lower rate. You just have to rearrange your money. You don't have to pay $10,000, $5,000, $1,200—whatever the case may be—to buy those points down in order to get a lower rate. You need the right loan officer to sit down with you and strategize. So, my big ask this week on this podcast is—you know, the call to action on it is—please, let's sit down and let's strategize. Don't just listen to a loan officer online saying, "Oh, I'm the... come see me because I'm going to be the one to strategize." Actually work with somebody who knows how to strategize that, and what's going to be best for you. One of the compliments I get all the time—which makes me so happy, it's one of my favorite ones to ever hear—is "We appreciated how you broke that down in layman's terms. We appreciated how you brought that to us in a case no one ever told us before, or how we didn't even know that was a possibility and now we do." Those are the kind of things your loan officer should be talking to you about. I want to see you pay your house off early if that's the goal. I want to see you put a bunch of money into investments, earlier the better, so that when you're older you're not like me and having to pay so much money a month in order to catch up on retirement, because I worked for a company that didn't offer retirement. I mean, not mad about it, it just is what it is. I was young, a little bit foolish, probably spent my money in really dumb ways—which I really did, anyone in their early 20s probably does—and I didn't even think to put money into a savings earlier, on an IRA or retirement. And I'm paying the price for it now. If I would have just either paid a couple hundred dollars a month towards that, paid off my house a little sooner, any of the case may be, I could then pay so much more now. I am paying so much more now, but you get what I'm saying—don't learn from my... that's my fault. That's my loss. I could have started even if my company did not offer a 401(k), which they did not. I just didn't know that, and I didn't have anyone to teach me. So, I am huge on teaching other clients right now how they can best utilize their money—the same money that they would be spending—in other ways to set up for financial success. Because there's a way to live life even paycheck-to-paycheck while setting your wealth up later on, so that you don't have to live paycheck-to-paycheck till you're 80 years old, till you're 40 years old, till you're... whenever the case may be. And that's what I want to see change. Those are the things I want to do. For so long, financial education wasn't in the schools anymore, especially the public schools, and now it's slowly coming back. But we have a whole generation of students who are probably somewhere between 20 years old right now and 40 who have never been taught financial education. If they weren't lucky enough to have parents teach them, maybe their parents didn't know themselves. Maybe they just weren't in the right hands. Maybe they lived growing up paycheck-to-paycheck, so the parents didn't have anything to teach them, and now they just simply don't know. That's where my team and I can come in and help educate you on that. There's no shame, like I just told you. I have now been so real with you guys in this podcast. I started out my life overspending, got stolen from by a family member with a 450 credit score, so I had to fix that. I've had to fix everything financially that I possibly can think of from when I was young till now. And if I can help pay it forward in any way and share that information that I've learned with anyone: zero shame, zero anything. Let's sit down and talk. And yes, is some of this to get you to homeownership if you want to be? Is some of this to help your homeownership now, so you can pay your house off sooner, so you can save that kind of money? Absolutely. And it doesn't matter the age. I work with first-time homebuyers who are in their 60s right now, because they've only rented their whole lives because they never had anyone tell them that they could buy. And that's where I come in. So, wanted to just really put it out there because when I saw his face light up yesterday when we were talking about, "No, this is... this is the rate," I had it all laid out for him on my computer with the program, so he could see it with his own eyes. I wasn't selling him anything. I was just showing him how to rework the numbers. But if you don't know how to rework the numbers on your own, then you... then you don't know. Feel okay, feel okay to ask. Be okay to ask. And let's set you up there, because that's financial wins in so many categories—so many categories. And I work with a lot of great financial planners who have worked with me, who've helped me, who've taught me. And again, I want to pay it forward to those people that didn't... weren't able to. My parents weren't taught finances, so they didn't know how to teach me finances. And I was fortunate enough to be in a career which taught me finances right away, and I see different finances every single day. And I, you know, I look at some and wonder "how the heck," but at the same time, if you are willing to look at it and say "I want to change this" or "I want to fix this" or "Hey, you know what? I met with a couple last week that were like, 'You know what? We were young, we were dumb, we just didn't have a care in the world. But now we have teenagers and now we have to figure out how to help.'" And my first thing was: let's sit down and let's help. Let's find a way to get you where you need to be. We set up a plan of attack, I could tell that they were totally into it, they wanted that help, they wanted that fixed, they just wanted those answers. No one had sat down with them before and told them what they needed to do. We sat down, we strategized with them, and I have no doubt within this next year they're going to be homeowners. And I'm so glad we were able to sit down and help them get there. Because before that, anyone who they did a pre-approval with just looked at them and said, "Sorry, no." And there was even... I had a conversation with a real estate agent this week. There's a local loan officer who shall remain nameless, but he literally looked at clients and told them they'd never own a home: "Forget it, stop even thinking about it, you're never going to own a home." So, instead of being that person that they could lean on to help understand what they need to do, he discouraged them of all discouragement, and now they're not going to buy a house. So, now you've got to go in and convince them that there are people out there who want to help. So, again, this is just to help educate you. Run the numbers. Run the numbers. Work with a loan officer who knows how to run the numbers. If they can't do that math in their head, run! Get them to you, get them... they should be, you know, versed enough. The problem is is that so many loan officers don't know how to do their jobs and actually calculate, because they've got all the systems that do it for them, that all they know is how to spit out what the system tells them. They don't know how to problem-solve and think outside of the box. And I don't know about you out there watching or listening, but what I know is problem-solving occurs every single day in my world, and we've got to be prepared to solve those problems every single day. And I want to think for myself on that, and I want to think for others, and I want to think like an underwriter and what's going to help that client get into a home, or what's going to help that client get from a 540 credit score to a 700 credit score, getting whatever secured credit card they need to get their interest rate up and things to that nature. There's a lot that goes into this business, and we're playing with a lot of people's money, emotions, numbers. Not everybody's great at numbers. It's just something I find fascinating. And it's not even the numbers I find fascinating when it comes to like calculating numbers—I'm not a math genius, I know people think maybe we are, I'm not a math genius—but what I love to calculate is how to save money. How do I get the same outcome by saving money? That's where I geek out. And so if I can help clients geek out on that same thing, because then they see it and they're like, "Holy cow!" That look on their face never gets old to me. And when they leave our office, our Zoom call, our phone call—whatever it is that's good for them—and they know that there's... there's hope on the other side, and there is a pep in their step, and their smile is huge, and they are walking away like, "Yes! This is possible, this is attainable," there is nothing that's better than that. I mean that wholeheartedly. So, if you are already there, or if you were sold on how amazing an adjustable-rate mortgage is and are now stuck, having to refinance to get out of that, and you want to work with somebody who wants to sit down with you and actually run numbers and figure out how—I know it's going to cost you a little bit of money to refinance, it does—but how can we make that money back up to you the soonest way possible and save you even more in the long run? I'm your girl. Give me a call. My contact number is in the details. But gosh, there is a will and a way. You can have a 6.99% interest rate and still pay it at a 5.375% interest rate. And I want to be the one to show you how. So, please drop your comments below. If there's a certain topic that we haven't hit on yet and you want to hear about it, please drop that below in the comments. We want to hear from you. Love all the feedback that we get, and thank you for those of you who are still listening and still tuning in. If you haven't shared us with a friend, please do—it helps the channel. Subscribe, and we get a new podcast drop every Wednesday. So, please look out for that, or like I said, subscribe so you get those notifications. And we look forward to seeing you next week here on the Always On Point podcast with Kristen Ambos.