When shopping for a new home, every potential buyer has a wish list. "X" bedrooms, "Y" bathrooms, pool, maybe a big, open kitchen with granite countertops and a nice patch of lawn out back. Price range is of critical import, though largely as an isolating factor. Once the parameters are established, it's a matter of falling in love.
When it comes to financing, however, most borrowers go into cold, hard number-crunching mode. Very few look past the curb appeal when shopping for a loan. They don't particularly care who they give their business to, provided that the math looks the most advantageous.
"Your name is Stan, you have two kids and enjoy juggling flaming swords. That's great. Now what are your rates?"
To be sure, you want your lender to be competitive in rates and fees. We all want the best deal available to us. Your choice of lending institution should involve more than just the numbers, though. It behooves you to know a little about the institution with whom you are doing business.
I know, I know. You could care less about who holds the note. You only care about the terms within said note. Before laughing off my assertion, consider my own recent personal experience.
I took out a line of credit against my primary residence last year with Citibank. I had several purposes for doing so, but that is not germane to this post. What is relevant is that I earmarked a good portion of those funds for use several months ago ... only to see my account essentially frozen. In the blink of an eye, the line was reduced to 1/4th of its original limit. It seems that Citibank was running scared, and initiated blanket reductions to credit lines across the Valley. No new evaluation nor appraisal of my specific property value. No advanced warning. Simply a letter in the mail informing us that per the terms of our agreement, they were exercising the right to unilaterally reduce the amount available on our line due to declining local values. The effective date stated was prior to my receipt of the notice.
Now, this peeved me. Imagine if some poor schmoe was set to tap his line of credit for a purchase, only to get to closing and find his funds no longer available. Yikes. That was not the case here, but I have subsequently heard of this very thing happening.
I understand the rationale to a degree, and many banks had already stopped issuing new lines entirely (Chase, Countrywide, etc), but the heavy handed application of this new policy did not sit well with me. It was especially frustrating that this institution was not interested in the least whether or not the current market value of my property still fell within Loan To Value guidelines (it did so comfortably, I might add). Was I borrowing against the entire Scottsdale area or just my house with this loan?
Life goes on, however, and I scouted out an alternative. I located an institution that not only offers a terrific product, but peace of mind. From the representative who handled my application to the manager who opened my new checking account, I feel very comfortable doing business with this institution. That fact was magnified when I sat down to sign the docs on my new line of credit with Compass Bank yesterday.
There in the payoff statement for my existing line was a $429 early termination fee from Citibank. Nice.
Were they legally entitled to charge this fee because I was closing out the line prior to two years? Unequivocally, yes.
Did this same institution basically put a gun to my head to refinance only to pistol whip me upon doing so? Undeniably, yes.
I had to admire the sheer audacity.
But I don't have to give them my future business.
My purpose here is not to bash Citibank, but to illustrate the importance of the institution that offers you financing. It's not just about the front end costs. It's also about how you are treated on the back end. By all means, find the most favorable terms that you can, but give a little thought to the guy behind the giving as well.
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Shopping for a New Scottsdale Home?
Give me a call at (480) 948-9450 or drop me an email at paul@rayandpaul.com
Looking for a Line of Credit in Scottsdale?
Give Compass Bank a try.
Ask for Linda Shoemaker, (480) 596-2617
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Paul... that is the problem with many companies when it comes to home equity lines. They can cut you off and freeze your account at any time with no warning. This has been going on for the last 8 to 12 months. I only think that you would find your neighborhood bank that would cater to you. The larger banks just don't care, because there isn't that much money in the HELOCs.