Friday, April 19, 2024

Scott, first I would like to thank you for all the good advice you have given me through your NEWSLETTER. In response to your question about our (readers) experience with telemarketers, I would like to share an experience that happened to me recently.

I, like many others out there, am looking to refinance my first mortgage at a lower rate than what I currently have. In my case, the loan is approximately $120,000 at 7.25% and also a second mortgage (home-equity loan) of $10,000 that I have at 12.25%. I decided to call a financial institution after receiving one of those infamous "you have been pre-approved" offers.

I spoke with a lady, who was very friendly, and she asked me if I could read the confirmation number on the right-hand side at the top of the letter. I gave it to her and she asked for some other information including my Social Security number.

I explained that I would be interested in refinancing with her company if they can beat the rates on my current loans. She said she would call me back with an answer.

About an hour later, she calls and tells me she has "good news" for me. They can combine both loans at a great APR of 9.48%. Stunned by what this lady is telling me I paused and asked her to explain how exactly it was that she was coming up with this GREAT deal since I was paying 7.25%.

Her answer was, "But Mr. Olivares you are paying 12.25% on the other one and you will be saving about $20.00 per month." At this time I told her to hold on while I started the DebtSmart Loan Calculator. I told her, and I quote, "How silly her offer sounded." I used the 30-year loan calculator, which I got from Scott, and told her that, yes she was saving me about $20.00 per month on the $10,000 loan. However, she is increasing the amount on the $120,000 loan by about $200.00 per month, and I asked her how it was that this was making any sense for her!

Her answer was that I could not "separate the two loans" the way I was doing it. At this time I knew there were only two possibilities: (1) this lady is not educated enough to have her current job or, the more likely case, (2) she's trying to gouge me by doing some "fuzzy math."

By the way, she was amortizing the loans for 30 years. Just like the original loan without taking into account that my second loan is amortized for only 20 years!

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