In Spanish-speaking countries, a bribe is known as mordida. In Italy, spintarella; in parts of Asia, baksheesh. Baksheesh can also mean a tip, which is perfectly legal and ethical in a restaurant, but not so much in a bank or government office.
Here in St. Cloud, MN, we have a pretty inflexible attitude about bribery: we don’t like it. When we discover it, we go further than that—we fine, jail, and otherwise make its practitioners wish they had turned bribes down. More than one mayor (Chicago comes to mind) has learned or is currently learning that the hard way.
But when it comes to negotiating with St. Cloud mortgage lenders, there is a perfectly legal way to bribe them into seeing things a little more your way. As the Greeks say, you can slide them a fakelaki (“little envelope”) to lower the monthly interest payments on your new St. Cloud home. You can sneak them what the Chinese call chaquian (“tea money”), and it doesn’t even have to be under the table. The U.S. mortgage industry has developed a perfectly ethical system for arranging a better deal. The Egyptians call it ad-dukhaan (“something for your cigarettes”). We call it points.
We don’t have to worry about being clandestinely recorded when we discuss how the system works. I’m going to put it out for everyone to see, right here:
When you are at the decision point in arranging the kind of home loan you want, you first decide on how quickly you wish to pay off the balance. All things considered, that usually boils down to how much you can comfortably afford to pay. As you’d expect, a 15-year term creates significantly higher monthly payments than does a similar 30-year payoff—but you wind up paying significantly less interest in the end. Likewise, if you choose more than the minimum down payment, the loan amount is smaller; hence payments are lower, less interest, etc.
In 2017, nobody has to troop down to the banker’s office to find out exactly how changes in each factor yield larger or smaller monthly payments. The web has dozens of calculators that let you monkey around to see exactly how each affects the bottom line. So where, exactly, does the baksheesh come in?
At the bazaar, of course!
In internet terms, the closest thing to a bazaar is the line of commercial sites that list “today’s mortgage rates.” Just as when you’re sauntering through the bazaar in the Casbah, it pays to keep a hand on your wallet—so don’t give out too much personal information to see the rates. But the good sites post lenders’ latest rates for St. Cloud mortgages, which is where the baksheesh comes in. It’s in the small print beneath the APR percentage, shown as “a rate at X points.” A point is shorthand for 1% of the loan amount; so, 1 point on a $200,000 loan is $2,000: that’s the bribe! The lender across the table appreciates it when you to slip him a little wink-wink, and will arrange a lower monthly payment amount if you “come to an arrangement.” A 2-point loan gets you a lower monthly payment than a 1-point loan. That’s the way of the world, after all…
Whether paying points makes good financial sense in your own situation is just one topic we might discuss when you give me a call. As always, there’s no cost—and no obligation—when you give me a call to consult about some of the ways you might take advantage of today’s St. Cloud market!