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As some of you already know, I’m deep in a search to buy a home here in the NYC area. One of the the first steps in this journey was understanding what sort of mortgage terms I could secure, and I solicited the help of several friends who had recently gone through their own housing searches.
My friends are total research badasses. So imagine my surprise when I found not just one, not two, not three, but four lenders offering rates that were meaningfully superior to what they secured through their own research. Rates that would save me thousands of dollars more per year in interest.
These vendors’ best rates were not heavily advertised. They did not show up in any of the major mortgage comparison websites.
Who are they?
They are the private bank arms of your local financial institution, and they are not as difficult to access as they might seem.
The Banks’ “Private Bank Customer” Discount
You may have walked into a bank branch and seen signage for private wealth services. Citi has one called CitiGold. Chase has one called Chase Private Client. They offer a bunch of services including a concierge for buying fancy concert tickets, waived fees on checking accounts, etc. Very few of those perks have tempted me in the past, but one of the chief benefits they provide is a preferred rate on their mortgage products, and that’s something I certainly am interested in.
This discount is anywhere from 12.5 to 50 basis points off market rates. The going rate for a 30-year fixed mortgage is about 4.0% right now; with the preferred rate, you would get a mortgage that would cost you 3.5-3.875%.
For a $600,000 loan – about what we are contemplating – that equates to over $61,000 of savings over the life of the loan, and about $306,000 over the life of the loan if you assume you can deploy those savings as they are captured in the stock market at historical 8% CAGR. Of course, there is sneaky inflation to be countered along the way; adjusted for 2.5% inflation every year, that would still equate to about $146,000 in today’s dollars from this decision. $146,000 from one small discovery!
The words “private bank” might conjure up images of champagne-drinking, caviar-eating multi-millionaires. The typical requirement for these wealth arms to is to have a minimum of about $200,000 in a combination of checking, savings, and brokerage and retirement accounts with the company to receive the advantaged rate. Not a small amount by any means, but probably more reasonable than you had initially thought, especially since it can include brokerage and retirement accounts.
One of the mortgage specialists was quick to point out to me that the measure was taken at closing, and that you were free to do whatever you wished with your accounts afterwards and still maintain your advantageous rate. Given that I have quite a few assets in long-term holds, I wouldn’t mind transferring $200k of those assets into a brokerage account to be stewarded by Citi or an equivalent provider, but you could certainly pull out a chunk of your dollars after the closing on the home.
Already have your dream home? The advantageous rates often apply to refinances as well. More money for everyone! (And PS I’m jealous – this home search stuff is a real energy drain).
Here were the four I checked out:
CitiGold: Starts at $200k of assets with the company to earn a 25 basis point discount. Strong 30-year fixed mortgage rates.
Chase Private Client: 12.5 basis point discount for $500k of assets with the company. 25 basis points for $1 million of assets. This was probably the weakest offering among the ones I researched.
Wells Fargo: Jumbo home loans are the only product to receive discounts. Clients get 25 basis points off just for setting up autopay of their mortgage to a checking or savings account. Starting April 10, 2017, they will receive an additional 12.5 basis point discount for having $250-$500k in assets with the bank or a total of 25 basis points for $500k-$1 Million.
Schwab Investor Advantage Pricing: Starts with $250k of assets with the company. Most competitive with products outside of the 30-year fixed mortgage. Best rates I’ve found on adjustable-rate mortgages (ARMs).
I will need to keep tabs on how this new opportunity compares to the constantly changing offers from other vendors, but I plan on taking advantage of these preferred rates when the time comes and encourage you to evaluate the opportunity yourself if you are considering a home loan. I get no reward for plugging this opportunity except the joy of helping another human being keep more of their hard-earned money. Now if only the process of finding the right property were as straightforward as finding a mortgage…
Readers, any other sources you used to find the best mortgage rate? Any encouragement or war stories for those of us who are slogging our way through the process?