Thursday, February 21, 2008

Fractional Loan Rates Drop

I received a cryptic call from Sterling Bank a couple days ago, saying that they were dropping their TIC loan rates to 6.75%. My TIC group refinanced with Sterling last spring, shifting from a group loan to individual fractionals at a rather exorbitant 7+% loan rate. At the time, as much as we beat on the loan officer they would not budge on the rate. Our TIC group almost came to blows over whether we should move to the fractionals, given the financial penalties of doing a refinance and the high rate and the short five year term - but in the end we did it.

I returned the call out of curiousity to find that a few months after closing on last spring's refi, the bank is calling to offer me the privilege of ponying up another several thousand dollars to REFINANCE AGAIN. I did not want to wear down the poor novice sales guy they put up to dialing for these dollars, but I had to ask him point blank - was he crazy? Yes, let me refinance my mortgage with you on an annual basis and pay all those ludicrous points and fees just for FUN! That makes perfect financial sense!

And no, they don't want to discuss cutting our rate. This is what I call - bad business. If you are cutting rates after you just sold me a higher priced loan within the last 12 months then don't call me to rub my face in it. As I said to Mr. Salesman - for those of us who recently opted for a TIC fractional loan (and that is most of us who have TIC fractional loans) this is not good news. Take that message to your front office.

Of course if you are buying a TIC lower fractional loan rates are something to give a bit of a cheer about.


Blogger Frank Swartz said...

We have been able to show most of our clients that it does not make sense to refinance unless you are dropping your interest at least 1 full percentage point. We have found that most drops in rate less than 1% creates a break even period that exceeds the fixed period of the arm when you factor in the closing costs. I would not encourage any one to refinance when it takes longer than 18 months to break even. I would like if at all possible to be contacted by the author of this article so I can find out who from my office made this call. My name is Frank Swartz and I am the Residential Sales Manager for Sterling Bank & Trust. My number is 415-970-9889 ext 508.

7:59 AM  

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