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Sooo........ we had a contract on a house to buy; and we were listing our our house (no mortgage) to sell. When we bought our last house (mortgage free) we’d cashed in stocks and other equities and the taxes and impact on our medicare premiums caused us to not want to do that again. So we took out a loan for the new place.
Our loan officer said “you guys have the assets to pay cash; I really shouldn’t be writing a loan if you simply plan on paying it off right away.” We said: “well, we do plan to use the proceeds from the sale of the house to pay the loan off quickly, but who knows when it will sell.” Loan officer said: “Please promise me you’ll wait at least 6 months before paying this loan off, and we said Sure.”
Well, our mortgage free house got a contract the very next day and in the end there is only 3 weeks between closing on the new place and getting proceeds from the sale of the old place. And, during this time the savings interest rates have dropped further. So, each month we’ll pay on a loan (3%) but only get .06% interest in savings of the proceeds.
We want to go ahead and just pay off the new loan. But we remember our conversation with the loan officer and don’t want to professionally harm her by paying the loan off earlier than our conversation during the application for the loan......
Wondering if anyone has insight about whether our loan officer will be professionally harmed if we pay off the loan immediately.
Every penny of his commission will be extracted from his bank account.
It's not just six payments it's a minimum 180 days before you pay it off, either via refinance or paying it off in cash.
Additionally all revenue that went to his company/branch will be refunded to the investor on the loan as well.
(not joking)
Thanks for your response. We have no intention of doing that kind of harm to another person who treated us with integrity. What if we made 6 payments, one each month, with the first 2 payments paying off 80% of the loan and then the last four months just paying off the balance in smaller increments, but not making the final payment until 180 days have passed?
Clearly, you should wait at least 6 months to pay off the loan. How are your other funds invested? Hopefully you don't simply have significant funds in a low-interest bank account. Look at investing these funds, too. That should offset the low interest rate that you'll be paying on the loan.
I appreciate your desire to be honorable with the loan officer whose time and effort you took to get the house.
Ask if your loan can be recast.
I.e., pay off a great deal of the principle, and save a ton on interest. And, pay the balance off in 6 months.
Clearly, you should wait at least 6 months to pay off the loan. How are your other funds invested? Hopefully you don't simply have significant funds in a low-interest bank account. Look at investing these funds, too. That should offset the low interest rate that you'll be paying on the loan.
Our other funds, which we chose not to liquidate are in higher income/interest potential accounts. However the lump sum we have from selling the house is just sitting in a .06% savings account and we don’t know of any other place to stash it for six months that will provide us any interest near the 3% we are paying on the mortgage.
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