Posted by Art_MD on 10/4/05 6:43pm
Msg #68857

Biweekly effective rate - question

Had a signing cancelled after docs printed.
Borrower had a call 10 minutes before I was to leave giving them a monthly payment and final interet rate. Numbers were $200 and 1.75% higher than any numbers they had discussed. Loan was fixed and they were expecting 3 yr interest only at 5% and 5.75 for years 4 thru 30.
What a difference.

In the package was a biweekly payment program.

For thinking numbers:
Loan 200,000
monthly payment at 6.75% = $1300
Make payment of $650 every 2 weeks.

Then they say
term saved - 6 yrs
interest saved $60,000
Yearly savings $2400

Effective rate 4.9%
Effective term 24 years.

What the heck is effective rate and where did they get it?

I'm sharp with numbers, but boy, not as sharp as some of these loan people.
I can make numbers jump thru hoops, but these guys make them jump over the Transamerican building !!!

Art

Reply by Anonymous on 10/4/05 7:03pm
Msg #68861

The problem is, borrowers don't know to request a copy of the Good Faith Estimate. And as you know, sometimes the GFE is in the packet that's to be signed w/ the Notary. Of course, that's too late.

Also, when it's edocs, I like to give the borrower that one last call prior to my printing them out and leaving. That way, they're aware of the #'s as opposed to getting sticker shock and waisting my time by making a bunch of calls at the closing.