Question: Okay, okay, well, maybe it’s not outright duplicity, but it sure will |> make them a few dollars off of less-than-observant mortgagees. I almost |> fell for it. |> |> I got a letter in the mail yesterday from my mortgage company, National |> City Mortgage out of Dayton Ohio. Here’s how it starts: |> |> “Dear Mr. Zuroski: |> |> Now there’s a way to save $xx,xxx.xx in interest on your current home |> loan through National City Mortgage and pay off your loan 7 years |> earlier. Our new EquityBuilder service gives you these benefits without |> the trouble and expense of refinancing. |> |> … |> |> Boy this made me mad! I guess because I almost fell for it. I’m thinking |> this through correctly, am I not? It seems they are trying to take |> advantage of those who don’t realize they can simply do the same without |> the expensive “services” of the bank.
Answer: Yep, you have this figured out for the scam it is. What you also don’t point out is that the extra you are paying piles up until 1 year has elapsed, at which point they make an extra payment; they are not paying the extra as it accumulates. In other words, you are giving them an interest free loan for a year, and losing the benefit of lowering the principal each month.
Many of these programs also charge you a small monthly fee as well.
Such a deal!
According to my trusty on-line financial calculator, just applying the $400 “setup” fee to your principal will shave around 6 months from a $100k mortgage. This is a much better use for that $400.
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