Hello, everybody. It's Sam from Financial Samurai. And in this podcast, I'm going to share how I failed at getting the lowest mortgage interest rate possible. So in the month of April 2019, the yield curve inverted. And that's great news for mortgage holders because we get to refinance our mortgage at a relatively better rate.

So short-term rates are higher than long-term rates. And therefore, you must take advantage. Everything is relative in finance. So I was going to say that I got the best mortgage rate possible, but I ended up failing. I didn't get what I wanted and what I thought I could get.

And I wanted to run you guys through why. So before I run you guys through why I failed, I want to share, in general, the best practices for how to get the best mortgage rate possible. The key to getting better pricing is to always generate competition. For example, the more employers compete for your services, the more you will get bid away for a higher salary.

And the more likely your employer will match that bid away price or just give you a raise. I still remember sitting in the living room of a house I wanted to buy back in 2004. The asking price was $1.55 million, and it had been sitting on the market for two months.

I was tempted to offer $1.45 million because why not? You've been sitting for two months. Obviously, nobody's interested. And this was pretty unusual, even for San Francisco at that time. And I had made up my mind to lowball the sellers when in walked a doctor couple at the open house.

They sat in the dining room and marveled at all the details of the house-- the high ceilings, the wainscoting, crown moldings, and so forth. So seeing them instantly created this FOMO, fear that I was going to miss out. My desire to lowball instantly faded away as they began talking.

So instead, I offered $1.525 million, or 75% more than I had originally planned. And I still wonder to this day if my emotions got the best of me. But thankfully, it all worked out in the end because I was able to sell that house in 2017 for much more than I purchased it for.

So here are the steps I take to get the best mortgage rate possible. I've refinanced, I think, eight times, maybe more, four properties since 2003. I mean, it's been kind of a refinance bonanza for the business, for the lending business, since interest rates have been coming down basically since the late 1980s.

So there are basically four steps. First step, get written official quotes from competing lenders. Verbal offers really don't mean much at all. In all my experience, every single lender is like, hey, show me a written offer, and we'll match or beat it. And the easiest way to do that is to go online and get quotes.

And then people will contact you, and then they're going to email you and say, hey, we can do this for you at this price. Two, use those quotes to contact your relationship bank. Your relationship bank is your main bank, the one where you have your checking account tied to or your work pay stub paycheck that gets automatically credited every single, what, two weeks or every single month.

Your relationship bank is the key to getting the best mortgage rate possible. They have a lot of your money, and you probably have multiple, multiple accounts with them. They certainly don't want to lose your business. And you must present that written offer. And if you don't have a competitive written offer, you've got to get one.

And one strategy-- this is an interesting strategy-- is to scour the internet and take snapshots of teaser rates some lenders or marketplaces offer if you just can't get anything official in writing or email. Now, these teaser rates are interesting because they're real, but just like when you go up and show at the car dealership for that really cheap car that they've been advertising, they're going to say, well, it's already been sold.

They're just trying to get you in. So the teaser rate was probably real at one point, but once you go and ask for that rate, it's probably not going to be there. But you can use that rate to your advantage. Three, promise more assets. A bank wants its customers to have as much money with them as possible.

Further, they want you to open up as many different accounts as possible to keep you as a sticky customer. This is cross-selling, one-on-one. So different accounts include checking account, business account, savings account, mortgage account, wealth management account, home equity line of credit, and a personal line of credit, which I don't really recommend because the interest rate is a little bit high.

The more money you can bring over to the bank and the more accounts you can open, the more attractive your mortgage interest rate offer will be. Banks have different tiers based on how much you have. What I've noticed is three tiers, basically. The first tier is if you have over $250,000 in assets with them.

That includes your investments. Second tier is if you have over $500,000 in assets with them. And the highest tier for the best pricing is if you have over $1 million in assets with them. And then finally, be ready to transfer funds away. The person who is willing to walk away from any kind of transaction generally has the highest leverage because you're basically threatening to move your assets if you don't get the best price or don't even get the best match, right?

So you better be able to walk the walk-- what is it, talk the talk and then walk the walk and move. Money is really fungible nowadays. You can transfer money at the click of a button. Maybe it takes a couple of clicks. But whatever the case may be, you need to walk if they don't give you the best.

You don't have to close all your accounts. You just have to be willing to open a new account with a different bank and go through the process of electronic funds transfer. So there you have it. Four easy steps, right? Well, I did all those four steps this time, and I didn't make it.

The best mortgage rate I could have gotten was 2.75% for a 7-1 arm with no refinancing cost at Wells Fargo. Wells Fargo, if I transferred over $1 million. If I transferred over $500,000, I could have locked in 2.875% for a 7-1 arm with no refinancing costs. Unfortunately, none of this happened.

The best I got was a 10-1 arm-- not bad, 10-1 arm-- but at 3% with about $3,000 in credits to closing. So I don't think it's going to be free, but it's going to be almost free. The better Wells Fargo rate was introduced to me by a financial samurai reader.

The reader took a couple of days to get back to me by email after I asked about the lender's contact information. And as soon as I got the information, I showed the rate offer to my existing relationship bank for 18 years-- of 18 years-- Citibank to see if they could match.

I had just locked in my 3% rate with Citibank, which I thought was pretty good after the 10-year yield declined to 2.45% from 3.2%. But I had not yet given Citibank approval to start the process yet. So this is really important for folks looking to refinance. You've always got time to make a final decision after you verbally agree to lock.

Don't let them bully you or pressure you into signing right away to give them approval to proceed. You have time. And time is really valuable when you're trying to get the best rate possible. So I used this Wells Fargo offer as leverage, and I showed it to Citibank. And surprisingly, they told me they could not match the rate, even though they said I could probably get 2.875% with minimal closing costs if I locked with them when I did at 3%.

So when I verbally agreed to 3%, they said they were going to have a special promotion the following week to get me down to 2.75%, 2.875%. So when I asked them, and then I actually got this written offer, they said no. So in other words, I was totally led on, in my opinion.

I told them I was going to move $1 million in assets to Wells Fargo if they didn't at least match the 2.875% rate. And the mortgage lender said, OK, fine. He'll go to the head of mortgage lending in San Francisco to see if he could get me down to 2.875%.

I waited another day, and the city mortgage head said, sorry, he still couldn't match the 2.875%, even though he told me to show him a better offer. So at least he gave me another seven days to decide whether I should refinance with Citibank at 3%. Now I was much more motivated to work with Wells Fargo instead.

It took another day and a half for the Wells Fargo mortgage officer to get back to me. We spoke at around 5:15 PM. He said I could absolutely refinance with them at 2.75% to 2.875% if I brought over $500,000 to $1 million. But first, I had to send him some common documents, such as my W-2, 1099s, rental statements, K-1s, and so forth.

So I got back to Wells Fargo at around 7:30 PM, and he said he'd review the documents and continue our dialogue the next morning. I believed him. I said, OK, fine. He said there's no rush because rates looked unchanged that evening. And I looked, and yeah, that's fine. So when he called me the next morning at 10 AM, he said he had bad news.

He said his bank informed him as of that morning they decided to discontinue their special mortgage rate promotion. There was just too much demand. And I was thinking to myself, come on. Are you kidding me? It's either I have the worst timing, or you're baiting and switching me. So he said, well, I'm sorry about this.

I'm going to have a lot of difficult conversations with other clients. But if I still wanted to refinance with him, I could. The rate would no longer be 2.875% with $500,000 in assets moved over. It'll be more like 3% or 3.125% with no fees. I was like, OK, you know what?

Forget it, man. If I'm going to get bait and switched, I might as well go to the original gangster bait and switch bank, which is Citibank. So at the very least, luckily I didn't waste too much of my time because the documents I gathered for Wells Fargo were necessary for my refinance with Citibank.

I simply forwarded that email to the Citibank mortgage officer. So there you have it. While I was busy writing articles encouraging readers to refinance during a flat or inverted yield curve, I wasn't spending enough time aggressively trying to refinance my own mortgage. I put too much faith in my relationship bank that they would match.

Too much faith. This cost me time and motivation with a competing bank. I didn't pounce hard enough on the 2.75, 2.875 offer with Wells Fargo because, you know what? I admittedly didn't want to go through the hassle of moving my funds. I just wanted really to leverage them, to be frank.

But you know what? Look, if the rate was more like 2.5% or 2.65%, I would have moved. I would have locked with Wells Fargo and transferred my money. So I hope everyone takes away from this podcast that timing is important. Timing is the reason why I produce these podcasts and I write these posts when there's an opportunity to save money.

Because saving money is very concrete. Whereas investing money, you don't really know until the future whether you made a good investment decision today. And the other point is know that you have time. You have time when you verbally agree to lock to shop around that offer. Banks seem to be kind of ruthless.

There's a lot of, hey, bringing you in with attractive rates, but then telling you the next day or the next week that they can't really match. So these guys are ruthless in terms of the way they do business. And they want to obviously maximize their profits. And you want to maximize your savings.

So don't be afraid to negotiate. Don't be afraid to get other offers. And don't be afraid to pit each bank against each other. So good luck, everyone. Rates are still low, although they've been creaming up a little bit as the stock market continues to march higher. But there's nothing better than saving money and taking advantage.

And I'm still a strong proponent of adjustable rate mortgages, because the average homeowner owns their home for about 8.3 years. And that's like the highest in a long, long time. So if you're going to go lock in for a 30-year fixed rate, that is not congruent with what the statistics say.

So good luck, everyone.