Renegotiating a Mortgage: One Man's Quest
A reader emailed us the letter he was planning to send to his lender in an effort to renegotiate the terms of his loan. We thought it would be interesting to get readers’ input, both in terms of changes/improvements to the letter as well as predictions about the likelihood of his success. Dear Madam or…
A reader emailed us the letter he was planning to send to his lender in an effort to renegotiate the terms of his loan. We thought it would be interesting to get readers’ input, both in terms of changes/improvements to the letter as well as predictions about the likelihood of his success.
Dear Madam or Sir:
I am writing to be considered for a loan modification. I am currently in year three of a 5yr fixed mortgage at a rate of 5.75%. As I weigh my options, I am asking that MORTGAGECO extend me a lower, fixed rate for a term of 30 or 20 years. I have every intention of exploring my mortgage options with other lenders but first I wanted to contact you. I would be happy to remain a customer of MORTGAGECO under the proper terms.
In no way should this be considered a plea…
…from a homeowner in financial distress (I will detail my current status below). I simply would like to offer you the opportunity to retain my business, and at the same time take a loan of yours out of the adjustable-rate category and move it to the fixed-rate (which I’m sure is in your interest as well given the current storied “mortgage crisis”).
The three-family home at which my wife and I reside was purchased in December of 2004 for $625,000. Having kept an eye on the area real estate market, and considering the amount of renovations we have done, I would estimate the current minimum price at $750,000. The rental income from the other two units is $2,550 per month (30,600/yr). My credit score is approximately 830. My income is over $70,000 per year. The second mortgage is approximately $50,000. I carry no other debt.
(Although she is not part of this contract since we were not married at the time, I wanted to mention that my wife’s salary is $45,000 per year and her credit score is also north of 800.)
I would sincerely hope that MORTGAGECO and INVESTMENTBANK look at my request as an opportunity to re-negotiate the terms to benefit both parties and not an opportunity to “make a buck” with fees. I thank you for your time and consideration on this.
Sincerely,
BORROWER
Thoughts or suggestions?
Thanks for several good chuckles, OP and snarky commenters alike. Good stuff – keep it coming (better than gawker!)
4:29 makes a good point. If you’re asking the bank to provide a competitive fixed rate for the remainder of the term and save some of the fees that you would normally have to pay on a refi, you have a credible proposal. You have a chance of not paying for new title insurance and mortgage recording taxes and fees which will save you quite a bit.
Most of above comments are written as if in response to a polished edited refi request to the bank, which this letter is not. It is a draft and the writer/borrower is seeking comments.
The writer should amend his sentence to read “I am asking that MORTGAGECO extend me as low a rate as possible, fixed rate mortgage, for a term of 30 or 20 years. Everyone is accurate in that with a positively sloped yield curve, fixed rate borrowing out 20 years has a higher cost than a short term 5 yr ARM. So, the request should not be for a “lower” rate fixed rate mortgage so much as “as low as possible a fixed rate mortgage”. This latter edit will highten the credibility in which the writer will be held by bank and achieve the beginning of a dialogue versus a flat-out rejection.
Thanks for stepping up OP.
Although I think you will have limited, if any success, I have to admit that if you have nothing to lose it is certainly worth a try.
Good luck and let us know how you make out if possible.
OP here,
I approached this with admitted naivete and also didn’t feel like I had anything to lose posing the question. In light of these comments I have taken every pill in my medicine cabinet and expect to soon meet the fate I deserve.
But seriously, thanks to those who offered helpful suggestions and insights.
This guy is on drugs, very potent ones. I’m having a party this weekend and my guest could benifit from whatever you are on, perhaps you’ll be so kind as to sell some to me and you could use the money to offset the fees you WILL have to pay to refinance your mortgage.
So much bloodless talk about the bank’s “interest” and “incentives.” What about the moral imperative? What about this gentleman’s value to the community? Surely we owe him support for not taking his human capital and literal capital to the suburbs!
Please post your social security number and contact information, good sir, and I shall wire you a donation forthwith!
I would love to read all the outraged posts if the mortgage holder wrote to this homeowner saying something to the effect:
“We were happy to serve you by giving you such a low rate on your mortgage 3 years ago but circumstances have changed and in order for us to stay in business and keep many middle-income employees employed we would like to renegotiate your loan at a higher rate effective immediately. We arent looking to make a buck, we are simply hoping that you ill renegotiate so that we all can benefit as a society by keeping our hard working employees employed.”
I’m sure the customer service rep in Bangalore will get right back to you. That type of letter goes straight in the round file, or gets passed on to the retail sidefor a sales call.
Some advice, worth what you paid for it:
Don’t waste time with letters or expect a lender to offer you a loan at other than market rates. Call your customer service rep or go a branch to see what rates are being offered, and ask if they will modify at the going rate (highly unlikely); otherwise you have to refi. For all practical purposes either a mod or a refi will be processed the same; appraisal, verifications, etc. You may get a slightly better deal on fees if you refi with your existing lender and it’s a halfway-professional outfit (e.g. Chase or Wells Fargo.