Is it worth paying more for a bank that actually communicates...

9 Replies

Cash-out refinance on my investment property out of state...

Bank 1 - $150,000 30 Year 4.85% (4.97% APR) $4,000 Closing Costs $46,000 Cash in my pocket after refinance

"Big Bank"

- Horrible communication

- Closing set for end of December, have not heard back from them in 2-3 weeks

- No response to my emails or calls

- Good rates and my current bank so convenient to use

Bank 2 - $153,000 30 Year 5.5% Closing Costs Rolled into Loan $50,000 Cash in my pocket after refinance

Loan Depot

- Communication is much better

- Process is streamlined (They have all underwriters, etc. working for them)

- Less Closing Costs

- Rates are higher

Is it worth going with Loan Depot over the "Big Bank"....aka pay more for the convenience and less of a headache?

The end result is actually the most important factor in decision making.  Which one can actually close on the deal.  Yes a lot of lenders advertise amazing rates and low fees but if they can't deliver then what is the point.  

Do you plan to use them multiple times or just for this one project? If this is the only project you plan on using them for, go with the lower rate. Once I close the loan, I don't care how well the communicate and hope to never hear from them. If you plan on building a relationship, go with the smaller bank. You have a better chance of getting help when needed, they may have more creative financing options for future projects, and they may be able to get you lower rates once that relationship is built.
(267) 520-0454

This will most likely be a one time deal...it is just super frustrating to not hear back or at least receive an update when I have all my paperwork ready to go.

I almost want to spite them and go with Loan Depot for the convenience but I am not 100% sold on them yet.

Personally, no communication is one of my pet peeves.  When someone doesn't communicate at all, it gives me very little confidence that they're going to do what they said they'll do - which in this case - is close. 

I doubt 0.65% is going to make or break the deal, so it largely comes down to personal preference.  But not communicating for several weeks before closing is not a good sign no matter how you look at it.  It certainly doesn't speak very highly of how much they value your business. 

If it were me, I'd go with option #2 - Loan Depot.  (For what it's worth, I know multiple investors who've done loans through them and were satisfied.)

Just my two cents.  Good luck whatever you decide.

Thanks @Kyle J. for the response! I am really leaning towards Loan Depot and it definitely helps hearing that you know others who have been satisfied with their business.

I have upcoming renovations and I want the cash now so I am looking for the fastest and most efficient way to cash-out refinance.

Cheers!

Originally posted by @Steve DellaPelle :

Cash-out refinance on my investment property out of state...

Bank 1 - $150,000 30 Year 4.85% (4.97% APR) $4,000 Closing Costs $46,000 Cash in my pocket after refinance

"Big Bank"

- Horrible communication

- Closing set for end of December, have not heard back from them in 2-3 weeks

- No response to my emails or calls

- Good rates and my current bank so convenient to use

Bank 2 - $153,000 30 Year 5.5% Closing Costs Rolled into Loan $50,000 Cash in my pocket after refinance

Loan Depot

- Communication is much better

- Process is streamlined (They have all underwriters, etc. working for them)

- Less Closing Costs

- Rates are higher

Is it worth going with Loan Depot over the "Big Bank"....aka pay more for the convenience and less of a headache?

 It's not actually possible to tell that the good communicator has a higher price, since these are structured differently (Loan Depot appears to have rolled closing costs into your interest rate). I bet if you had LD structure it like BB, or BB structure it like LD, the overwhelming majority - if not all - of that .625% difference would go away. Let me run some quick/guesstimate numbers to restructure LD to be similar to BB.

0.5% to discount points is rougly ballpark 0.125% to rate.

$4k / $150k = 2.6%. As a consumer you would call this 2.6 discount points, a lender would call it 260 basis points.

2.6% / 0.5 discount points = 5.33 increments of 0.125% buydown to rate (or in this case buy "up" to a higher rate with 260 basis points of closing costs covered by the rate). Round down to 5, since rates only come in 0.125% increments. 

5 * 0.125% = 0.625% = as I suspected, approximately the entire difference between the two is due to LD covering ~$4k of your closing costs in the rate. 

Now, that 0.5 discount points per 0.125% to rate is very approximate (sometimes it's 0.3, sometimes it's 0.7, etc), so at the end of the day one may be 0.125% to rate, or so, better than the other, when structured the same. But this is pretty consistent with ~80% of lenders all being in a narrow band of being pretty freaking close in terms of rate these days once each loan offer is structured identically (back in 2006 it might be 0.5% or 1% difference in rate between lenders, not the 0.125% to 0.25% in variance we see today), meaning it comes down to knowledge, communication, responsiveness, etc.

So the answer to "Is it worth paying more for a bank that actually communicates?" is a good news answer: it's not at all clear to me that there's any significant difference in payment between these two lenders (0.25% to rate should never make or break a deal, I think the difference here will end up either 0% or 0.125%), so pick who you want to work with and go with that.

Chris Mason, Lender in CA (#1220177) and California (#1220177)
415-846-9211

@Chris Mason That was extremely helpful, thanks so much for the response.

If this is the case (and it seems to be) then it would make sense for me to go with LD. BB was not great on my first closing and I was skeptical about going with them again, but for the sake of convenience (I have accounts open with them) it made sense.

I have a call with LD in about 10 minutes so I am hoping this goes well.

Thanks again!

Money has no emotions, neither should you.

Continue down the path of greatest financial reward. You will be farther ahead when it's all over.

I've been in finance both as a banker and CFO for nearly 40 years and learned that the most important part of the relationship is frank communications. It's really the hairdresser syndrome--develop a relationship with an individual you trust and keep that relationship. These days bankers move more than rude lane changers on the highway, so find a good one and stick with her.

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