Relationship mortgage discounts for moving a million assets

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Topic Author
softwaregeek
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Joined: Wed May 08, 2019 8:59 pm

Relationship mortgage discounts for moving a million assets

Post by softwaregeek » Wed May 08, 2019 9:37 pm

Hello all -

SUMMARY: I'm looking for opinions and personal experiences of some weird, substandard brokerage accounts, which I would move money to in exchange for a cheaper mortgage

I'm currently shopping for a mortgage refi. As you might expect given this forum, I'm pretty...frugal. As a result, I've built up assets of several million dollars over several decades and about six months ago I bought my first really nice house. Rates have come down and I would like to refinance.

Since this is a *nice* house and I'm in jumbo territory, many of the banks are offering me significant discounts for moving significant amounts of money.



I bought my house last june with a 3.875% jumbo mortage. This include a .375% rate improvement for moving $500k to Merrill edge. I have always been a Schwab guy but it was a pretty fat discount. (Side note: Merrill Edge website is four stars, but if you actually need to talk to anyone, it's one star, maybe zero stars. They offer free trading, but I pretty much just rebalance my ETF's every december and invest my IRA every year so who cares )

Interest rates have gone down again. My BofA mortgage rep has moved on, and BofA told me that they wouldn't offer me a relationship deal this time.

However, several competing banks have offered me deals.

HSBC: $1 million gets you 0.5% off a mortgage, which I do care about, plus the usual bank stuff I get at Schwab. Plus a fancy credit card for free, but I have one I like and it gives me more points, which are worth it. But their brokerage is an unknown quantity, and I there aren't many reviews of it. That' s a concern for me.

Citi: $1 million gets you 0.5%. I am told Citi gives 0.625% for $2 million. This includes their Citigold package, which as far as I can tell, offers pretty much what I get at Schwab bank, plus a few airline miles worth maybe $100 a year, plus an utterly awful self directed brokerage, which clearly they don't care about. I mean, the self directed brokerage is truly awful, they license it from a place called Pershing. You can look it up. The pricing is fine, it's just...crap. However, they were offering me 3.375% on a big mortgage. For that, I can probably live with it. Oh, and a concierge, to help buy stuff that I usually don't spend on, since, as I mentioned, I'm cheap.

Wells Fargo: Wells is offering me .125 for each $250k I move to them, up to $1 million and 0.5% reduction in the mortgage rate. I am trying to determine whether their wellstrade would count towards this, since paying a percentage is just not gonna happen. This includes the 'private bank' which pretty much includes what I get at Schwab now, but with fancier branding. They also offer a fancy credit card for free, but I probably wouldn't use it anyways, and my annual spend isn't high enough to make it compelling.

Bank of America: Offered me $600 off closing fees. I was a little surprised since they were so enthusiastic about getting me to move money over. But...not this time. I'm not wedded to Merrill Edge. it's a nice product, probably half a step below Schwab, and the BofA credit card rewards for $100k+ linked assets are sweet, but I can get that with a $100k ETF investment.

HEDGEFUNDIE
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Re: Relationship mortgage discounts for moving a million assets

Post by HEDGEFUNDIE » Wed May 08, 2019 9:51 pm

First Republic needs to be on your list. I just refinanced with them at 2.65%.

Yes they use Pershing, but Pershing actually has some positives. For example you get access to DFA funds, no advisory fee required.
Last edited by HEDGEFUNDIE on Sun May 12, 2019 12:08 pm, edited 1 time in total.

FoolStreet
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Re: Relationship mortgage discounts for moving a million assets

Post by FoolStreet » Wed May 08, 2019 11:35 pm

HEDGEFUNDIE wrote:
Wed May 08, 2019 9:51 pm
First Republic needs to be on your list. I just refinanced with them at 2.65%.

Yes they use Pershing, but Pershing actually has some positives. For example you get no-commission access to DFA funds.
Wow! Jumbo? What term? How much did you need in their account? I’m at 3.5% for a jumbo 1.xM loan, 30 yr fixed.

Topic Author
softwaregeek
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Re: Relationship mortgage discounts for moving a million assets

Post by softwaregeek » Wed May 08, 2019 11:39 pm

Was first republic for a 30 year fixed, no points? I could get cheaper if I was willing to do an ARM, but I'm terrified of a rise in interest rates.

HEDGEFUNDIE
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Re: Relationship mortgage discounts for moving a million assets

Post by HEDGEFUNDIE » Wed May 08, 2019 11:47 pm

FoolStreet wrote:
Wed May 08, 2019 11:35 pm
HEDGEFUNDIE wrote:
Wed May 08, 2019 9:51 pm
First Republic needs to be on your list. I just refinanced with them at 2.65%.

Yes they use Pershing, but Pershing actually has some positives. For example you get no-commission access to DFA funds.
Wow! Jumbo? What term? How much did you need in their account? I’m at 3.5% for a jumbo 1.xM loan, 30 yr fixed.
$1.24M loan, 5/1 ARM. Moved over half a buck.

I’m saving $10k/yr in interest over the 30 year fixed. In five years rates would have to jump to 5-6% and stay there for a bunch of years for my decision to be a bad one.

dellfanboy
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Re: Relationship mortgage discounts for moving a million assets

Post by dellfanboy » Wed May 08, 2019 11:51 pm

HEDGEFUNDIE wrote:
Wed May 08, 2019 11:47 pm
FoolStreet wrote:
Wed May 08, 2019 11:35 pm
HEDGEFUNDIE wrote:
Wed May 08, 2019 9:51 pm
First Republic needs to be on your list. I just refinanced with them at 2.65%.

Yes they use Pershing, but Pershing actually has some positives. For example you get no-commission access to DFA funds.
Wow! Jumbo? What term? How much did you need in their account? I’m at 3.5% for a jumbo 1.xM loan, 30 yr fixed.
$1.24M loan, 5/1 ARM. Moved over half a buck.

I’m saving $10k/yr in interest over the 30 year fixed. In five years rates would have to jump to 5-6% and stay there for a bunch of years for my decision to be a bad one.
Are you located in CA? This is an amazing deal. You move over $500k and they gave you a 2.65% 5/1 ARM on 1.24M loan? How much did you put down? Am I reading that right? That's a smoking deal!

HEDGEFUNDIE
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Re: Relationship mortgage discounts for moving a million assets

Post by HEDGEFUNDIE » Wed May 08, 2019 11:54 pm

dellfanboy wrote:
Wed May 08, 2019 11:51 pm
HEDGEFUNDIE wrote:
Wed May 08, 2019 11:47 pm
FoolStreet wrote:
Wed May 08, 2019 11:35 pm
HEDGEFUNDIE wrote:
Wed May 08, 2019 9:51 pm
First Republic needs to be on your list. I just refinanced with them at 2.65%.

Yes they use Pershing, but Pershing actually has some positives. For example you get no-commission access to DFA funds.
Wow! Jumbo? What term? How much did you need in their account? I’m at 3.5% for a jumbo 1.xM loan, 30 yr fixed.
$1.24M loan, 5/1 ARM. Moved over half a buck.

I’m saving $10k/yr in interest over the 30 year fixed. In five years rates would have to jump to 5-6% and stay there for a bunch of years for my decision to be a bad one.
Are you located in CA? This is an amazing deal. You move over $500k and they gave you a 2.65% 5/1 ARM on 1.24M loan? How much did you put down? Am I reading that right? That's a smoking deal!
That’s what I’m saying. First Republic for the win.

123
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Re: Relationship mortgage discounts for moving a million assets

Post by 123 » Wed May 08, 2019 11:55 pm

I would consider moving assets for a significant discount if I could do so without any cost or significant inconvenience to myself. If you have substantial investment positions that are basically "forever" positions without any expected activity those might be safe to move. For example if you've got a large IRA you could move a significant part of it for "storage" to get your discount and leave part of it for rebalencing and new purchases where it presently resides. If there's no cash awaiting investment in the account there's no reason for them to contact you on an ongoing basis.
The closest helping hand is at the end of your own arm.

playtothebeat
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Location: southern california

Re: Relationship mortgage discounts for moving a million assets

Post by playtothebeat » Thu May 09, 2019 12:16 am

Depending on where you’re located, you likely have banks in the area which cater to high net worth individuals. These will usually be your best bets for getting good personalized service and discounts for having assets with them.

Here in Southern California that’s the likes of First Republic, City National Bank, Torrey Pines Bank, First Bank, etc

dellfanboy
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Re: Relationship mortgage discounts for moving a million assets

Post by dellfanboy » Thu May 09, 2019 12:21 am

HEDGEFUNDIE wrote:
Wed May 08, 2019 11:54 pm
dellfanboy wrote:
Wed May 08, 2019 11:51 pm
HEDGEFUNDIE wrote:
Wed May 08, 2019 11:47 pm
FoolStreet wrote:
Wed May 08, 2019 11:35 pm
HEDGEFUNDIE wrote:
Wed May 08, 2019 9:51 pm
First Republic needs to be on your list. I just refinanced with them at 2.65%.

Yes they use Pershing, but Pershing actually has some positives. For example you get no-commission access to DFA funds.
Wow! Jumbo? What term? How much did you need in their account? I’m at 3.5% for a jumbo 1.xM loan, 30 yr fixed.
$1.24M loan, 5/1 ARM. Moved over half a buck.

I’m saving $10k/yr in interest over the 30 year fixed. In five years rates would have to jump to 5-6% and stay there for a bunch of years for my decision to be a bad one.
Are you located in CA? This is an amazing deal. You move over $500k and they gave you a 2.65% 5/1 ARM on 1.24M loan? How much did you put down? Am I reading that right? That's a smoking deal!
That’s what I’m saying. First Republic for the win.
I just sent you a private message! Any help would be appreciated.

sc9182
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Re: Relationship mortgage discounts for moving a million assets

Post by sc9182 » Thu May 09, 2019 11:04 am

Don't necessarily count CHASE out., especially if you got private banking deal (200K-250K will do). If you can get their Match the rate/terms deal, they could do better than the best quote you've got:

To optimize, go to their Quote site:

https://apply.chase.com/mortgage/CRQ/CRQResults.aspx

With 20% or 30% down-payment check possibility of best possible Rate. Ideally, go chase small banks/lenders, and brokers etc, and get your best possible terms; do get your specific Worksheet for your mortgage. (not just their rate-sheet)

BTW, with 25%-30% down, you can also do interest-only ARM loan for 1/8 % - 1/4 % higher rate over their ARM rate (not that I recommend it, but there may be very specific cases - this may be applicable/may-be-ok)

Now that you got your own best Worksheet from some other lender, take it to you Private Banker/Mortgage specialist in local Chase branch., they will try to (and most likely will) get that matched and with bit of negotiation - you can have'em beat it too.

Just as any big-bank lender - their process could be somewhat slower, but they mostly cover the points-charged for their own delay. Usually, seen it taken up 50-75 days turn-around to close, likely any other big banks' mortgage would take that long. BTW, if you are buying/closing on new/new-to-you home (rather than ReFi), they mentioned they have 'expedited' process, and dunno much about it - though do like the fact they have such process.

IIRC, they also can do 15% down on Jumbo loans, without need for PMI. May be they charge you one-time 1/8th or quarter point.

HEDGEFUNDIE
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Re: Relationship mortgage discounts for moving a million assets

Post by HEDGEFUNDIE » Thu May 09, 2019 4:28 pm

sc9182 wrote:
Thu May 09, 2019 11:04 am
Don't necessarily count CHASE out., especially if you got private banking deal (200K-250K will do). If you can get their Match the rate/terms deal, they could do better than the best quote you've got:

To optimize, go to their Quote site:

https://apply.chase.com/mortgage/CRQ/CRQResults.aspx

With 20% or 30% down-payment check possibility of best possible Rate. Ideally, go chase small banks/lenders, and brokers etc, and get your best possible terms; do get your specific Worksheet for your mortgage. (not just their rate-sheet)

BTW, with 25%-30% down, you can also do interest-only ARM loan for 1/8 % - 1/4 % higher rate over their ARM rate (not that I recommend it, but there may be very specific cases - this may be applicable/may-be-ok)

Now that you got your own best Worksheet from some other lender, take it to you Private Banker/Mortgage specialist in local Chase branch., they will try to (and most likely will) get that matched and with bit of negotiation - you can have'em beat it too.

Just as any big-bank lender - their process could be somewhat slower, but they mostly cover the points-charged for their own delay. Usually, seen it taken up 50-75 days turn-around to close, likely any other big banks' mortgage would take that long. BTW, if you are buying/closing on new/new-to-you home (rather than ReFi), they mentioned they have 'expedited' process, and dunno much about it - though do like the fact they have such process.

IIRC, they also can do 15% down on Jumbo loans, without need for PMI. May be they charge you one-time 1/8th or quarter point.
Just spent 20 min on the phone with these guys. The best they could offer was 3.25%, which was my rate before the refinance. No ability to match or beat First Republic.

afan
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Re: Relationship mortgage discounts for moving a million assets

Post by afan » Thu May 09, 2019 4:42 pm

Stating the obvious: you care about the cost you are going to pay, not the size of the discount. Shop around, Don't just look at big banks and what they will take off their rates. Mortgage brokers will often offer better rates. Not necessarily big companies but usually they will sell the mortgage to another bank once you close.

When we were in the refinancing stage, we never found our bank to offer a competitive deal. Sometimes after refinancing our mortgage ended up back at our bank but that was because they bought bit after closing.

It does not matter what rate someone else got on a different loan product, somewhere else. Refinancing is local. Several websites have sortable lists of rates from a wide variety of sources. I assume they pay to be listed.

If a big bank ends up giving you the best deal, then go with them. Do not assume that this will always be the best option.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

Topic Author
softwaregeek
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Re: Relationship mortgage discounts for moving a million assets

Post by softwaregeek » Thu May 09, 2019 5:04 pm

Update: I took the Citi offer to BofA and challenged them to beat it.

They offered me 3.25, a $900 bonus to move my account (Merrill Edge Promotion) and $600 extra rebate on closing cotss (BofA tiered benefit).

This beats Citi 3.375 with zero points.

I really don't like BofA, but for an eighth, I'll suck it up.
Last edited by softwaregeek on Fri May 10, 2019 2:19 am, edited 1 time in total.

spacecadet610
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Re: Relationship mortgage discounts for moving a million assets

Post by spacecadet610 » Thu May 09, 2019 7:11 pm

3.25% on a 30 yr jumbo? How many points?

That sounds pretty good.
softwaregeek wrote:
Thu May 09, 2019 5:04 pm
Update: I took the BofA offer to Citi and challenged them to beat it.

They offered me 3.25, a $900 bonus to move my account (Merrill Edge Promotion) and $600 extra rebate on closing cotss (BofA tiered benefit).

This beats Citi 3.375 with zero points.

I really don't like BofA, but for an eighth, I'll suck it up.

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grabiner
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Re: Relationship mortgage discounts for moving a million assets

Post by grabiner » Thu May 09, 2019 8:49 pm

The value of an 0.5% reduction on a 30-year mortgage is about equivalent to 3.5 points, given the usual relationship between points and mortgage rates. Thus, if you are planning to take out a $500K mortgage, this is a $17.5K incentive, which is 1.75% of the $1M you would be moving.
Wiki David Grabiner

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softwaregeek
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Re: Relationship mortgage discounts for moving a million assets

Post by softwaregeek » Thu May 09, 2019 9:28 pm

UPDATE: Yesterday I spoke with Citi, BofA and Wells. The catch when I clarified with BofA was that they wanted $1M in *NEW* money, existing cash didn't count. I would have actually had to raise my balance to $1.6M, which I didn't want to do.

So I went to Wells and asked them to match, which they did, although their account bonuses are not quite as generous.

Wells offered me 3.375% with no points, and no closing costs, or 3.25% with me paying closing costs. Since the closing costs are taxable but the interest is partially tax exempt, the payback period on the extra eighth would be quite high given the $68 per month pretax difference. So I locked the 3.375% with no fees. (I hope I made the right decision - back of the envelope math tells me that I am somewhere around 100 months just to breakeven)

On my mortgage balance of approximately $1M, I estimate this will save me $350 per month pretax and $250 per month post-tax versus my current mortgage.

WF mortgage rep clarified that self directed Wellstrade is fine to count toward the limit. Still not pumped, since I'm not that enthused about Wells Fargo as an institution, but I will deal, I suppose.

Topic Author
softwaregeek
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Re: Relationship mortgage discounts for moving a million assets

Post by softwaregeek » Thu May 09, 2019 9:32 pm

And let me just add, I'm absolutely shocked that I get these discounts.

I mean, for Merrill Edge, I've paid exactly $0 in trading costs on the three trades I've made in the last year, and kept a hundred bucks in the required checking account. And they gave me a big discount. And I am going to Wells and will spend probably $50 on trading commissions next year. And I'll probably keep $100 in the checking account. I mean, what's the ROI on this for them?

desi_kalle
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Re: Relationship mortgage discounts for moving a million assets

Post by desi_kalle » Fri May 10, 2019 12:15 am

I did the same with Merrill Edge a few years ago. I'm planning on refinancing within the next year or so and to prepare, I will move out all assets from ME to another brokerage (and get transfer bonus) so I can move it back when it's time to refinance. The look back period is 2 months so you need to plan a bit.

For the poster who mentioned City National Bank (CNB). Their rates are much higher even if you factor in relationship/asset discounts vs. the traditional big banks like BofA/Chase.

Also, Chase did not match my rate/fee with BofA even after telling me they match or beat competitor rates. All they did was increase the points to get the interest rate to match the BofA quote. Kind of a slap in the face to think I would fall for this trick.

Topic Author
softwaregeek
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Re: Relationship mortgage discounts for moving a million assets

Post by softwaregeek » Fri May 10, 2019 2:21 am

grabiner wrote:
Thu May 09, 2019 8:49 pm
The value of an 0.5% reduction on a 30-year mortgage is about equivalent to 3.5 points, given the usual relationship between points and mortgage rates. Thus, if you are planning to take out a $500K mortgage, this is a $17.5K incentive, which is 1.75% of the $1M you would be moving.
Morgtgage is a mil. Silicon valley is a rip-off. So a 35k benefit.

sc9182
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Re: Relationship mortgage discounts for moving a million assets

Post by sc9182 » Fri May 10, 2019 9:21 am

desi_kalle wrote:
Fri May 10, 2019 12:15 am

Also, Chase did not match my rate/fee with BofA even after telling me they match or beat competitor rates. All they did was increase the points to get the interest rate to match the BofA quote. Kind of a slap in the face to think I would fall for this trick.
Sorry your efforts didn’t work.

But the KEY to success is, get a competitors WorkSheet, and do engage along with with Private Banker rep. They should definitely bat for you taking it up their chain for approval.

May be I am biased or lucky, we had success about each of 4 times (including extended fam) to be able for Chase to match in the last 4 years. Again, the Key has been competitors worksheet for the jumbo loan you are considering., and intent to develop Private Banking relationship (bringing new assets in).

Again, we sure shop seriously for good rate/costs elsewhere and have Chase match/beat it (takes 2-3 days for higher ups approval). But may not be successful everywhere. They were able to waive 2.25% points away to get their best rate to be able to match broker/competitors worksheet!

Me guessing: bringing a quarter million into Beverly Hills branch private banking may not have much sway :-) guess location/branch also matters!

Thanks

Startled Cat
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Re: Relationship mortgage discounts for moving a million assets

Post by Startled Cat » Fri May 10, 2019 9:49 am

I'm kicking myself for not knowing about these relationship discounts when I last refinanced. I bought a home not long ago and my initial mortgage rate was 4.5%, then I refinanced shortly after at 4.125% (lender paid the closing costs). It happens that I moved some assets to Merrill Edge at about the same time for a bonus, but at the time I didn't know that this could qualify me for a discounted mortgage rate.

I'm hoping there will be a good opportunity to refinance again in the near future, taking advantage of a relationship discount, and also moving from a 30 year fixed loan to a 10/1 ARM, as I now think that's a better risk/reward tradeoff for me. Ideally I'd like to bring the interest rate down near 3%, which would save substantial interest cost on a $1.4M mortgage. Optimizing this is much more significant than other tweaks I could make to my finances.
softwaregeek wrote:
Thu May 09, 2019 9:32 pm
And let me just add, I'm absolutely shocked that I get these discounts.

I mean, for Merrill Edge, I've paid exactly $0 in trading costs on the three trades I've made in the last year, and kept a hundred bucks in the required checking account. And they gave me a big discount. And I am going to Wells and will spend probably $50 on trading commissions next year. And I'll probably keep $100 in the checking account. I mean, what's the ROI on this for them?
It's similar to generous credit card and bank account promotions, isn't it? The bank isn't going to make money on people like you and me. But they calculate that some fraction of people will keep hundreds of thousands of dollars in the checking account earning 0%, pay for asset management services, and so on. A lot of people aren't financial optimizers and don't like the complexity of spreading their business across multiple banks. Banks are looking to lure these people to cross-sell products and services. People with substantial assets are especially prized customes. The modern consumer banking business model seems built on offering generous incentives to attract customers, who end up having a wide variance in profitability.

That said, some chatter above put this discount in the ballpark of $35k on a $1M mortgage, which is a much larger than a credit card sign up bonus.

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softwaregeek
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Re: Relationship mortgage discounts for moving a million assets

Post by softwaregeek » Fri May 10, 2019 9:52 am

A sescond thing I want to clarify: The first guy I called at BofA over their phone line didn't know these discounts even existed.

The second person I called at BofA was a direct referral from a senior exec at my work. This contact works in a very wealthy area in Silicon Valley. He was able to turn this around in 24 hours.

So, who you call at the institution matters as well.
Last edited by softwaregeek on Sat May 11, 2019 6:52 pm, edited 1 time in total.

Startled Cat
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Re: Relationship mortgage discounts for moving a million assets

Post by Startled Cat » Fri May 10, 2019 10:05 am

softwaregeek wrote:
Fri May 10, 2019 9:52 am
A sescond thing I want to clarify: The first guy I called at BofA over their phone line didn't know these discounts even existed.

The second person I called at BofA was a direct referral from a senior exec at my work. This contact works in Palo Alto, the center of wealth in Silicon Valley. She was able to turn this around in 24 hours.

So, who you call at the institution matters as well.
My mistake was not knowing that the rates big banks offer are fluid, depending on things like geography and unpublished relationship discounts. At the time I financed, the rates they listed on their websites were uncompetitive with small direct lenders I found on Bankrate, so I counted out the big banks. The one large bank I was talking to wasn't able to match the rates I found on Bankrate. Both of my mortgages ended up being bought by Wells Fargo, and I found it odd that Wells Fargo wouldn't just advertise the same rate and bypass the middleman.

I'm located in the Bay Area as well, of course. I've heard that First Republic is competitive in the local jumbo mortgage market, so I plan on talking to them next time I look at refinancing.

rsk
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Re: Relationship mortgage discounts for moving a million assets

Post by rsk » Fri May 10, 2019 11:18 am

These rates definitely depend on where you are in the US. I am on the east coast and First Republic and Wells are both 15-20 basis points higher than the numbers being quoted here.

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softwaregeek
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Re: Relationship mortgage discounts for moving a million assets

Post by softwaregeek » Fri May 10, 2019 11:45 am

I did my first mortgage and got discounts, but I didn't know as much about them. To clarify, from my WF rep:

"if you can transfer 1 mil to Wells Fargo, cash, stock or retirmen accounts are all ok, rate can be reduced by 0.5%. (Each 250K reduces 0.125% rate up to one mil)."

Citi actually publishes their "relationship mortgage rates" online.

BofA doesn't publish this anywhere, as far as I can tell.

HSBC publishes the rates online.

pacodelostigres
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Re: Relationship mortgage discounts for moving a million assets

Post by pacodelostigres » Fri May 10, 2019 11:49 am

If you have several million dollars, why do you need/want a mortgage? Sounds like an avoidable headache.

HEDGEFUNDIE
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Re: Relationship mortgage discounts for moving a million assets

Post by HEDGEFUNDIE » Fri May 10, 2019 11:55 am

pacodelostigres wrote:
Fri May 10, 2019 11:49 am
If you have several million dollars, why do you need/want a mortgage? Sounds like an avoidable headache.
If I can borrow $1M at (in my case) 2.2% (including tax benefits), why wouldn’t I do that?

Even conservative estimates of nominal market returns are at least 5%.
Last edited by HEDGEFUNDIE on Fri May 10, 2019 12:19 pm, edited 1 time in total.

sharwinkersh
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Re: Relationship mortgage discounts for moving a million assets

Post by sharwinkersh » Fri May 10, 2019 12:07 pm

Is there anything to stop you moving the assets out right after closing, since you’ve locked your rate? I posed this question to my banker at WF, and he said there isn’t, but wanted to see if anyone is aware of any penalties.
BonusFreak

HEDGEFUNDIE
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Re: Relationship mortgage discounts for moving a million assets

Post by HEDGEFUNDIE » Fri May 10, 2019 12:31 pm

sharwinkersh wrote:
Fri May 10, 2019 12:07 pm
Is there anything to stop you moving the assets out right after closing, since you’ve locked your rate? I posed this question to my banker at WF, and he said there isn’t, but wanted to see if anyone is aware of any penalties.
I suppose the answer to your question depends on your personal ethics...

But no, the loan documentation does not allow the bank to call your loan or raise your rate if you fail to maintain those assets with them.

DonIce
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Re: Relationship mortgage discounts for moving a million assets

Post by DonIce » Fri May 10, 2019 1:09 pm

HEDGEFUNDIE wrote:
Fri May 10, 2019 12:31 pm
I suppose the answer to your question depends on your personal ethics...
Ethics? You're dealing with a bank and playing by the rules of the contracts and offers that they offer you. Banks have no hesitation to use the terms of contracts to their advantage and neither should individuals.

If there's no stipulation in the contract that you have to keep the assets there for a certain length of time, then you're free to move them, guilt free.

DonIce
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Re: Relationship mortgage discounts for moving a million assets

Post by DonIce » Fri May 10, 2019 1:13 pm

softwaregeek wrote:
Thu May 09, 2019 9:32 pm
And let me just add, I'm absolutely shocked that I get these discounts.

I mean, for Merrill Edge, I've paid exactly $0 in trading costs on the three trades I've made in the last year, and kept a hundred bucks in the required checking account. And they gave me a big discount. And I am going to Wells and will spend probably $50 on trading commissions next year. And I'll probably keep $100 in the checking account. I mean, what's the ROI on this for them?
Simple, you have a lot of assets so you are a lower risk borrower and therefore you can get a lower rate. There's no surer way for a bank to know that you really have those assets than seeing them in an account that you have open with that bank.

nepats
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Re: Relationship mortgage discounts for moving a million assets

Post by nepats » Fri May 10, 2019 1:36 pm

Timely topic. At what point in the process do they lock in the discount? For example, if I move some accounts just prior to closing does that count or does it have to be done at the time of application?

HEDGEFUNDIE
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Re: Relationship mortgage discounts for moving a million assets

Post by HEDGEFUNDIE » Fri May 10, 2019 1:55 pm

DonIce wrote:
Fri May 10, 2019 1:09 pm
HEDGEFUNDIE wrote:
Fri May 10, 2019 12:31 pm
I suppose the answer to your question depends on your personal ethics...
Ethics? You're dealing with a bank and playing by the rules of the contracts and offers that they offer you. Banks have no hesitation to use the terms of contracts to their advantage and neither should individuals.

If there's no stipulation in the contract that you have to keep the assets there for a certain length of time, then you're free to move them, guilt free.
In most other contexts I would agree with you.

However, my mortgage banker is one of the most well-connected people I know in Silicon Valley (not a surprise when you consider how important real estate is to Bay Area residents). He's financed the homes of dozens of tech founders, and has not hesitated to connect me with people I would otherwise not have the chance to meet.

So in my case at least, I would be doing myself a disservice by viewing this as a one-time transaction rather than as a relationship to be nurtured.

ivk5
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Re: Relationship mortgage discounts for moving a million assets

Post by ivk5 » Fri May 10, 2019 1:59 pm

HEDGEFUNDIE wrote:
Fri May 10, 2019 1:55 pm
DonIce wrote:
Fri May 10, 2019 1:09 pm
HEDGEFUNDIE wrote:
Fri May 10, 2019 12:31 pm
I suppose the answer to your question depends on your personal ethics...
Ethics? You're dealing with a bank and playing by the rules of the contracts and offers that they offer you. Banks have no hesitation to use the terms of contracts to their advantage and neither should individuals.

If there's no stipulation in the contract that you have to keep the assets there for a certain length of time, then you're free to move them, guilt free.
In most other contexts I would agree with you.

However, my mortgage banker is one of the most well-connected people I know in Silicon Valley (not a surprise when you consider how important real estate is to Bay Area residents). He's financed the homes of dozens of tech founders, and has not hesitated to connect me with people I would otherwise not have the chance to meet.

So in my case at least, I would be doing myself a disservice by viewing this as a one-time transaction rather than as a relationship to be nurtured.
That’s instrumental, not ethical, reasoning. Perfectly reasonable but doesn’t seem connected to your earlier “personal ethics” comment.

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softwaregeek
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Re: Relationship mortgage discounts for moving a million assets

Post by softwaregeek » Fri May 10, 2019 2:30 pm

nepats wrote:
Fri May 10, 2019 1:36 pm
Timely topic. At what point in the process do they lock in the discount? For example, if I move some accounts just prior to closing does that count or does it have to be done at the time of application?
My experience with BofA/Merrill was that the accounts had to be moved by five days prior to close. This was allow them time to prepare paperwork.

It went very easily, but at the last minute they told me I needed to have a BofA checking account as well. I went online and funded one with $100 from my debit card.

There was no requirement that I keep the money there after close , but they offered me a retention bonus to keep for 90 days and for a year. so I kept the money there for that, and also frankly because i was curious about Merrill Edge and a big bank, because I had only Schwab bank for 20+ years. I've kept it there because I've been pondering the fat credit card rewards they offer with higher tier accounts.

My conclusion was that the technology piece of BofA was slicker than Schwab, but if you need to talk to someone, you're hosed. Even if you're in the $250k-$1 million account tier. Every time I called BofA, I got frustrated.

nepats
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Re: Relationship mortgage discounts for moving a million assets

Post by nepats » Fri May 10, 2019 3:11 pm

Very helpful. Thanks! I am working with Wells so I will reach out to them

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softwaregeek
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Re: Relationship mortgage discounts for moving a million assets

Post by softwaregeek » Fri May 10, 2019 3:20 pm

pacodelostigres wrote:
Fri May 10, 2019 11:49 am
If you have several million dollars, why do you need/want a mortgage? Sounds like an avoidable headache.
Many reasons.

1. The principal value of the mortgage inflates away over time. Whereas, the real value of a house should increase in line with inflation.
2. The first 750k of this is tax deductible for federal, state, and for those over $250k, medicare capital gains tax. So 3.375*(1-35%-9.8%-3.8%) for those of us in CA. So at the margin, I'm paying 48% tax rate. My effective after-tax rate on that money is 1.8%.
3. Assuming 2% for point 1 and tax rates in point 2, the money is de-facto free.
4. It's also a great hedge against inflation. When inflation goes up, the real value of the mortgage decreases.
5. Most of my remaining assets have huge capital gains . To sell them would be to fork over six figures to the feds/state. Plus potentially put me in an even higher tax bracket.
6. I get to invest a million dollars and earn dividends and principal appreciation.

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softwaregeek
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Re: Relationship mortgage discounts for moving a million assets

Post by softwaregeek » Fri May 10, 2019 3:32 pm

And let me add one more critical benefit to the above: Liquidity.

There are two critical determinants of your financial safety: Net worth and liquidity. Both are critical.

For example, I am very highly compensated as a software person in Silicon Valley with a very niche skillset which is very valuable to a very small set of companies. However, I have been through two downturns and I know the job and the pay could disappear at any moment.

If I lose my job, I still have to pay for all the things I need to pay for, and I would need the financial reserves to do that. I could draw down $1M for a very long time to pay the mortgage. But if the money was tied up in the house, it would count towards my net worth, but my liquidity would be low.

saving4good
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Re: Relationship mortgage discounts for moving a million assets

Post by saving4good » Fri May 10, 2019 4:05 pm

Wow these rates are boggling my mind.

I'm also looking to refi my condo down from 4.875%. (600k house 438k loan) I don't have much to move around, so I understand I won't have access to such nice point discounts.

Not sure if I'm missing something. I'm using online aggregates like Nerdwallet to shop around for the lowest rate and 4.125% (no fees to close) is the best I can see. It sucks that rates for condos are always higher, but it would be nice to get something lower than 4.125%.

I called First Republic and was told they don't do refinance loans in cases like mine. :confused

Any ideas how to get the lowest rate besides comparing shopping on online aggregators?

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Re: Relationship mortgage discounts for moving a million assets

Post by HEDGEFUNDIE » Fri May 10, 2019 4:08 pm

softwaregeek wrote:
Fri May 10, 2019 3:20 pm
2. The first 750k of this is tax deductible for federal, state, and for those over $250k, medicare capital gains tax. So 3.375*(1-35%-9.8%-3.8%) for those of us in CA. So at the margin, I'm paying 48% tax rate. My effective after-tax rate on that money is 1.8%.
The math is a little more complicated, because it’s likely some part of your mortgage interest is filling the gap to the standard deduction, unless you have $24k in additional itemized deductions.

On the other hand, CA has not conformed to the federal tax law changes, so you are able to deduct interest from $1M in principal on your state return, not just $750k.
Last edited by HEDGEFUNDIE on Fri May 10, 2019 4:12 pm, edited 2 times in total.

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Re: Relationship mortgage discounts for moving a million assets

Post by HEDGEFUNDIE » Fri May 10, 2019 4:09 pm

saving4good wrote:
Fri May 10, 2019 4:05 pm
Wow these rates are boggling my mind.

I'm also looking to refi my condo down from 4.875%. (600k house 438k loan) I don't have much to move around, so I understand I won't have access to such nice point discounts.

Not sure if I'm missing something. I'm using online aggregates like Nerdwallet to shop around for the lowest rate and 4.125% (no fees to close) is the best I can see. It sucks that rates for condos are always higher, but it would be nice to get something lower than 4.125%.

I called First Republic and was told they don't do refinance loans in cases like mine. :confused

Any ideas how to get the lowest rate besides comparing shopping on online aggregators?
You’re probably not missing anything. The rates we are talking about are on loans of $1M+.

saving4good
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Re: Relationship mortgage discounts for moving a million assets

Post by saving4good » Fri May 10, 2019 5:43 pm

Got it. It's interesting that higher loan amounts = lower rates. I would've thought it was the other way around, since from what I've read online it seems that jumbo have higher rates.

But I guess it makes sense. It's the same amount of work for the bank but they are making more in interest and taken on relatively less risk.

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softwaregeek
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Re: Relationship mortgage discounts for moving a million assets

Post by softwaregeek » Fri May 10, 2019 7:40 pm

Quick update: I did another round of negotiations, cause I'm just like that.

The final tally:

1. Citibank - Move $1M, 3.375%, no points, no fees, $3k closing costs.

2. Wells Fargo - Move $1M to WellsTrade, 3.375, no points, no fees, no closing costs. Alternatively, 3.25%,and I pay $4k closing costs

3. BofA - THE WINNER. 3.25%. $5k closing costs Less $600 for my current BofA account Tier. In 9 months, they will give me a special account move bonus of $2500 for moving an additional $1M to Merrill Edge, bringing my balance there to $1.6M

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softwaregeek
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Re: Relationship mortgage discounts for moving a million assets

Post by softwaregeek » Fri May 10, 2019 8:16 pm

A few final thoughts:

1. My back of the envelope calculations show the net present value of the relationship discount and cash rebates at about $38k. Which is a mind boggling benefit for parking ETF's at Merrill Edge.

2. On a monthly basis, I'm saving about $425 pretax and $300 post tax.

3. I still do prefer doing business with Schwab, but for people who need to refi a mortgage, they aren't even in the arena. . And I'll see what my new account tier gets me at Merill Edge. Apparently, $1M in assets at gets me some kind of upgrade, so maybe they will pull closer to even on the service front.

4. The conforming market is pretty staid. You might be able to get a rebate here or there or maybe even an eighth. But the jumbo market is the wild west and if you have assets, you can haggle like a bazaar.

5. 3.25% is mind boggling to me.

6. (*Edit*) The broker at Citi said he had been doing mortgages for 27 years and done 'only a few' of these relationship mortgages.
Last edited by softwaregeek on Fri May 10, 2019 8:41 pm, edited 2 times in total.

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softwaregeek
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Re: Relationship mortgage discounts for moving a million assets

Post by softwaregeek » Fri May 10, 2019 8:20 pm

saving4good wrote:
Fri May 10, 2019 4:05 pm
Wow these rates are boggling my mind.

I'm also looking to refi my condo down from 4.875%. (600k house 438k loan) I don't have much to move around, so I understand I won't have access to such nice point discounts.

Not sure if I'm missing something. I'm using online aggregates like Nerdwallet to shop around for the lowest rate and 4.125% (no fees to close) is the best I can see. It sucks that rates for condos are always higher, but it would be nice to get something lower than 4.125%.

I called First Republic and was told they don't do refinance loans in cases like mine. :confused

Any ideas how to get the lowest rate besides comparing shopping on online aggregators?
I had a relatively small conforming loan until recently. Your best bet is getting a personal referral to a super aggressive broker. I did multiple rounds of refi's on my prior house, starting at 5% and going down to 3.375%. Once you have a repeat relationship, you will be able to do better on a consistent basis. The trick is finding one - it's a lot like finding a car mechanic. Most of them suck and a few are gifted. My broker was challenging to deal with, but truly gifted. I did four or five refi's including the last loan after she moved to BofA.

Alternatively, I have used a place called Provident Funding. Their rates were quite good, although they were absolutely miserable to deal with. My broker explained to me that the way they keep their rates low is by using minimum wage employees. They are offering 3.875% now. A point on a $400k loan is worth $4k pretax right now, so the payback period would be quite good.

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Re: Relationship mortgage discounts for moving a million assets

Post by HEDGEFUNDIE » Fri May 10, 2019 11:15 pm

softwaregeek wrote:
Fri May 10, 2019 8:16 pm
5. 3.25% is mind boggling to me.
The yield on the 30 year Treasury is 2.87%

So you are only 10% more risky than the Federal government :mrgreen:

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softwaregeek
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Re: Relationship mortgage discounts for moving a million assets

Post by softwaregeek » Sat May 11, 2019 12:27 am

True. I am paying a 38bps premium. On the other hand, I'm more fiscally responsible than the federal government, so perhaps I should get a discount.

10/1 arm was priced 28bps above government 10 year bond rate.

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Re: Relationship mortgage discounts for moving a million assets

Post by unclescrooge » Sat May 11, 2019 1:39 am

softwaregeek wrote:
Fri May 10, 2019 9:52 am
A sescond thing I want to clarify: The first guy I called at BofA over their phone line didn't know these discounts even existed.

The second person I called at BofA was a direct referral from a senior exec at my work. This contact works in Palo Alto, the center of wealth in Silicon Valley. She was able to turn this around in 24 hours.

So, who you call at the institution matters as well.
I had a guy at BofA that got me fantastic rates on jumbo mortgages. 0.25% better than my friends who were bofa employees.

I think I refinanced with him for free 7 times in the past 5 years. I think I referred 15 clients to him.

Unfortunately he moved to Wells Fargo. Not sure if I want to work with those folks.

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Re: Relationship mortgage discounts for moving a million assets

Post by softwaregeek » Sat May 11, 2019 4:05 am

Had the same thought about Wells. But an eighth for me is 1250 a year. would I deal with an awful bank that gives me 100 bucks a month? Sure.

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