Big Shop or Local Lender: Is it worth saving 40bps?

[Emmett O.]

Hi everyone,

I'm in the process of buying my first investment property and I have a conundrum. I thought I was all set up to use my mortgage broker that I used for my first house but when she got back to me the rate was much higher than I expected.

With that issue popping up I shopped around and got a lower rate from Quicken. The rate she gave me was 6%, the rate Quicken gave me was 5.625%.

My question is: is it worth saving 40bps just to get the cheaper loan? Or should I stick with the local lender? My preference is the local lender but I was wondering if anyone had any further wisdom or can relate to this story.

Thanks everyone for your help!

-Emmett

[Chris Mason]

Originally posted by @Emmett O.:

Hi everyone,

I'm in the process of buying my first investment property and I have a conundrum. I thought I was all set up to use my mortgage broker that I used for my first house but when she got back to me the rate was much higher than I expected.

With that issue popping up I shopped around and got a lower rate from Quicken. The rate she gave me was 6%, the rate Quicken gave me was 5.625%.

My question is: is it worth saving 40bps just to get the cheaper loan? Or should I stick with the local lender? My preference is the local lender but I was wondering if anyone had any further wisdom or can relate to this story.

Thanks everyone for your help!

-Emmett

 I would suggest not taking an internet lender at face value until you see a Loan Estimate. No one puts investment property rates online because they would scare off the retail owner occupants, but look at how they market:

So if you just call their call center in Detroit and describe that scenario and ask "what's my rate?" they will come back with 4.5% (if the ad above is your scenario on that date) and you will go "OMG that's great!"

For those unaware, "2.125 points," that you have to scroll to the small print to find, is a fee equal to 2.125% of the loan amount. On a $500k mortgage, it works out to $10,625. If you want to pay an extra $10,625 in fees, call the other lender back, tell them you have $10k extra to blow, and ask what your rate is now. I suspect that you will like your answer.