How to Stick It to the Banks

If you’re like me, you really don’t like the idea of being a slave to a lender, feeling the crushing burden of debt as the beginning of each month rolls around. Maybe you’d like to stick it to the banks. After all, the top 5 banks did profit over $60 billion last year.

Here’s how you can stick it to the banks:

Refinance your mortgage at a lower rate

Even with a loan to value ratio above 100%, there are programs, including Home Affordable Refinance Program, or HARP, that will allow homeowners to get a lower interest rate. Bank of America, Wells Fargo, Citigroup, and Chase have all announced they will participate in HARP. You can stick it to the banks by lowering the amount of money you’re paying each month with more of it going towards your principle reduction.

Refinance your mortgage for a shorter term

Sometimes it’s not the amount of the payment, it’s how many you have to make. By reducing a $200,000 loan at 5% from a 30-year to a 15-year term, you’ll save over $100,000 over the life of the loan. And with people living in their homes longer, it makes sense. Just think, you can stick it to the banks by keeping that $100,000 in your pocket and out of theirs.

Pay down your principle a little each month

By adding a little bit to your mortgage payment each month, you can pay down your home sooner AND keep interest out of the hands of your lender each month. If you have a $150,000 mortgage at 5% for 30 years, your monthly principle and interest (P&I) payment is $805. Add $150 each month to the payment and you’ll have your home paid off in less than 22 years–as opposed to 30–and you’ll keep almost $46,000 in interest out of the hands of the bank. Remember, that $150 each month is yours, not the bank’s, since it’s equity you’re putting back in your home. Bump it to $200 a month and you cut another two years off the loan and keep an extra $7,000 from them. That’s sticking it to the banks. Go here for a really awesome mortgage payoff calculator to see how much you can keep in your pocket.

Short sale your home

If you are in financial hardship and you’re unable to get a loan modification, avoiding foreclosure and short selling your home is a great way to stick it to the banks. By negotiating a short sale, you’ll do a few things that will help you and keep excess funds out of the bank’s pockets.

• Future loans will likely be at a lower rate if you short sale versus have a foreclosure. Yes, you’ll be able to get a loan if you have a foreclosure, but not necessarily at a great rate. Lower interest rates mean you can keep sticking it to the banks in the future.
• You’ll minimize or eliminate any money the bank might receive from the mortgage insurance company. Mortgage insurance is intended to protect lenders against foreclosure, not short sales.
• By concluding a short sale prior by the end of 2012, you may avoid paying taxes on the deficiency (the difference between the outstanding balance and the amount the bank received from the short sale) saving you loads of your own cash.
• Best of all, you stick it to the bank by not letting them have your home. If you let them have your home, the banks just screw your neighbors by selling it too cheaply.

I actually appreciate the function that banks serve: To provide a source of funds from which to borrow in order for each of us to buy a house and live the American dream. But with their ever-increasing reach into our wallets through excessive loan fees, interest rates, banking fees, ATM fees, Bank of America’s fees for debit card usage, and checking fees, not to mention the 2.5% to 4.0% that gets charged to the retailers each time you use your credit card, plus the credit card interest…

It all adds up. At least when it comes to real estate, there are some great ways to stick it to the banks.