$5,200 to save 0.25%?

4 Replies

Hello BP!

I'll try to make this short. My wife's parents invested in her name over 14 years ago and destroyed her credit with 2 foreclosures and a bankruptcy. It's now off her credit but our local credit union whom her parents had a mortgage with wants $5,200 to become a member again. I'm currently refinancing our rental property through them and am looking to refinancing my primary residence. My wife isn't on the rental property but is on our primary residence. The interest rate is .25% (3.5%) lower and we would also save $150/month in PMI making our total savings of $354/month on a 30yr fixed. We currently have a 4.25% with $212/month in PMI. We wanted some advice on whether or not we should pay off the $5,200 to be able to refinance through this credit union. With $4200+ year savings it sounds like the right decision. Because she is on the loan we can't refinance with this credit union without paying the balance off. Any suggestions?

Find a different lender? Can't imagine having to pay a fee to become a member of a credit union, and that rate is competitive but doesn't seem special. I would definitely do some shopping on the rate rather than pay to become a member. If for some reason you can't go get the mortgage through someone else, you break even in 15 months, so as long as you stay in the home that long I would do it. Again though, best idea, find a different mortgage lender.

I agree with Joel. Rates are great at the moment, lots of institutions are competing. It doesnt cost you anything other than your time to shop for rates. I would check with 5-10 lenders. Remember to let them know that you are shopping and leverage their offers against each other. In the end, do the math and see if it makes sense to stay with your CU and pay the fee.

Best of luck!

Originally posted by @Joel Johnson :

Find a different lender? Can't imagine having to pay a fee to become a member of a credit union, and that rate is competitive but doesn't seem special. I would definitely do some shopping on the rate rather than pay to become a member. If for some reason you can't go get the mortgage through someone else, you break even in 15 months, so as long as you stay in the home that long I would do it. Again though, best idea, find a different mortgage lender.

I think you are misunderstanding the OP. It appears that the wife has $5200 in debt that she owes the credit union. That isn't a membership fee. The credit union will not allow them to be a member until the wife pays her debt.

It is likely their credit is in extremely bad shape. They need to pay their debt regardless.

Unless you are refinancing out of an FHA loan (which has lifetime mortgage insurance / MIP) you should be able to get the PMI removed with an appraisal.

You could also use a different lender.   The $5200 in debt should be a separate issue, as should be the mortgage insurance removal.  If the $5200 is a really old bad debt, most creditors will take a settlement offer of about 25% of the balance owed after negotiating hard.