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refinancing your home


shalab
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I have a mortgage with Wells Fargo, and they have refinanced for me (at their suggestion) and for some reason they picked up 100% of the costs *twice* in the past four years. I believe that my current rate is 4.125. I am hoping that they'll do it again.

 

do you ever worry about why they would do that?

 

Just good business practice of taking good care of your customer?

 

Maybe there is some sort of incentive for your bank rep?

 

How does that compare to the variable rate?

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I've refinanced twice in the last 4 years.  I went from 6.0% to 5.25% to 4.25%.  Took more than $500 per month off my mortgage payments in the process.  I've simply added most of that back as an extra payment each month and will wind up paying off the loan well in advance.

 

Just looked at current rates and could probably get down to 3.75% if I pay a point to buy down the rate; but i don't think it's worth it at this point.

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do you ever worry about why they would do that?

 

Just good business practice of taking good care of your customer?

 

Maybe there is some sort of incentive for your bank rep?

 

How does that compare to the variable rate?

 

I have certainly wondered, especially being a WFC shareholder. They actually just mailed me a letter one day saying that they wanted to refinance the property at no cost to me. No bank rep. I can only assume that it's a customer retention strategy, though twice in 4 years seemed excessive to me (not that I would turn them down...). Their ARM is currently 2.5%.

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It would be strange for WFC to offer to refinance if they held the loan in their own portfolio.  Why would WFC lower its interest income?

 

Now if WFC had sold off the loan and currently just serviced it, then it would be very wise for them to offer the refi since they can resell the new loan for a profit. 

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It would be strange for WFC to offer to refinance if they held the loan in their own portfolio.  Why would WFC lower its interest income?

 

Now if WFC had sold off the loan and currently just serviced it, then it would be very wise for them to offer the refi since they can resell the new loan for a profit. 

 

I thought so too. But they still hold the loan, and as I said they offered it twice. Go figure. I do have good credit, and maybe it was a reaction to the sub-prime mess. So now the question is how to get them to do it again  ::)

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It would be strange for WFC to offer to refinance if they held the loan in their own portfolio.  Why would WFC lower its interest income?

 

Now if WFC had sold off the loan and currently just serviced it, then it would be very wise for them to offer the refi since they can resell the new loan for a profit.

 

May be, this is part of the ethos that Buffett is talking about.

 

Makes sense to me, would you rather your customer re-fi with you or with someone else and have to deploy the funds with an unknown risk or not deploy the funds at all?  Now, they have a happy paying customer and portfolio is intact with no prepayment.

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I had very different experience with Wells though. I was looking for new loan roughly 15 months ago. I got much higher quote from Wells than some smaller bank. I took loan from smaller bank and then they sold the loan to Wells.

 

Now I wanted to see if refinance rates will be lower by decent margin. I called same smaller bank again. They offered me rate one point lower. I called Wells, they offered me rate not much lower than what I have right now. I explained to them that smaller bank is offering lower rate and last time wells ended up buying the loan from them so why can't they at least match it. There is good chance that they will sell the loan to Wells again.

 

I got explanation about having volume discount etc but if they could match then it will have better returns than buying from smaller bank because smaller bank is going to take their margin.

 

I don't have any idea about Wells general practice . Just sharing my personal experience.

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I had very different experience with Wells though. I was looking for new loan roughly 15 months ago. I got much higher quote from Wells than some smaller bank. I took loan from smaller bank and then they sold the loan to Wells.

 

Now I wanted to see if refinance rates will be lower by decent margin. I called same smaller bank again. They offered me rate one point lower. I called Wells, they offered me rate not much lower than what I have right now. I explained to them that smaller bank is offering lower rate and last time wells ended up buying the loan from them so why can't they at least match it. There is good chance that they will sell the loan to Wells again.

 

I got explanation about having volume discount etc but if they could match then it will have better returns than buying from smaller bank because smaller bank is going to take their margin.

 

I don't have any idea about Wells general practice . Just sharing my personal experience.

 

Geez, I dont  get it.

 

rranjan, maybe you should talk to alph23's bank rep?

 

This does not sound good for shareholders of WFC

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I think they own the loan but I might be wrong.

If yours is a conforming mortgage, it might very well be packaged with Fannie or Freddie and the small bank may be using Wells to service it.  I believe you can check it at Fannie/Freddie websites with your home address.  (I checked mine a couple of years ago.)  It will not give out details - it will tell you if the loan is with them or not.

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