|José Olivares is an Electrical Engineer currently working for the U.S. Navy at
The Naval Air Warfare Center in Lakehurst.
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
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
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
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 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!