Last winter when the financial world around us was crumbling I thought about my home loan. I had taken out a terrific 4.75 % loan when my friend and mortgage broker, Kent, called and told me not to miss out on this one. I leaped on it and knew that it was only for five years, but the loan was at a fixed rate for five years and that was good enough for me. The loan was interest only and that didn't bother me since home values were starting to take off, this was 2004, just ahead of the massive home value increase of '05 and '06. Five years was a long way out there and this was definitely a good loan for my circumstances. I had put a substantial amount down on my home, 27%, so I wasn't worried about loosing equity. Fortunately I knew right where the loan documents were and pulled out the nice plaid folder the now-defunct title company had given to me for easy reference. As a real estate broker I'm used to saving documents related to real estate, even my own, but otherwise I'm a train wreck when it comes to remembering where I've stashed important stuff. My marriage dissolution was missing for several months and I accidentally found it stuffed into the Clinton family book of paperdolls I'd purchased on a whim. I think I thought first family paperdolls might be collectible one day. Now I doubt it, but at least I didn't toss it out with the proof of divorce inside of it. As it turns out, that divorce document has been vitally important to document my case for a loan modification.
I found the Note in the stack of closing papers and I read it carefully. I pulled out my calculator and did some rough estimates. My loan had a margin of 2.25% that would not change but to this amount would be added the average of the one year Libor (London Interbank Offered Rate), stay with me....it's not going to get any more complicated than this. It appeared that the Libor index had actually gone down. My previous index was 2.5% and now was below 2%. This got my attention.
I continued to monitor the Libor weekly--well I actually looked at it daily but it only changed weekly, maybe twice a week, I'm not sure. In January I received a letter from the mortgage corporation stating that I would soon be receiving an official rate change notice from them regarding the loan that resets in May. Fine, I'm ready.
The letter arrived in mid-February and I only read it part way through since I was in a hurry. In the upper third of the letter was Interest Rate Information with the old rate and the new, lower, rate. It's final, my rate has gone down from 4.75% to 4.25%. Ta Dah! Do I know how to pick 'em or what? I was very pleased with the outcome and told my friends that I had indeed read this gobbledygook correctly. Yes! And the loan will remain at this new lower rate for one year. Perfect, because I will sell my home next spring/early summer once my daughter graduates and is ready to head to college. But the next morning I picked up the letter again to, truthfully, savor my victory once more, only to read the shocking final paragraph. To fully amortize my loan my payment will be going up $485.86. What? This has to be a mistake or some hideous aberration of the truth.
I called and challenged this payment change. Where did they come up with this figure? How? Here's a hint: to fully amortize my loan. My previous loan was interest only and now it's time to pay the piper or in this case, the mortgage company. Okay, okay I have an HP 12C calculator. Why do I calculate a payment that's approximately $200 less than the amount they're quoting?I made my calculations based on a 30 year fully amortized loan and the mortgage company's was calculated on a 25 year loan since my first five years were interest only. Oh, great.....
Read my next blog and follow my on-going attempt for a loan modification.
