By Robert Kroll
How tough could it be to refinance an old high-interest $500,000 loan on a nice, well-maintained brownstone building in the West Village? Damn hard, it turns out!
With interest rates on residential properties at 3-4% nowadays, I was tempted to refinance a 5-year ARM loan presently set at 6.8%. Every interest point lower on the loan saves about $5000 per year, which is not chump change. I want to make it clear that I am not talking about the loan on my apartment but rather the loan on my apartment building, which was taken out by the co-op board in the 1990s to raise funds for major capital improvements on the building.
Here is a sampling of the responses I received from bankers to my refinancing request:
- “Sorry, I am in the residential lending department. You need a commercial loan.”
- “Sorry, I am in the commercial lending department. You need a residential loan.”
- “Sorry, I only provide loans of more than $1 million and you are seeking only half that amount.”
- “Sorry, I only lend to corporations with income of more than $250,000 per year. Your corporation has income of only $150,000 per year from co-op shareholders maintenance fees.
- “Terribly sorry,” (says a government bureaucrat with Freddie Mac). “We only loan money to banks. Go to a bank.”
- “Sorry, I am a banker. I loan money to people with warm bodies” (are we lizards?) “not corporations that own cooperatives occupied by shareholders.”
- “Sorry, my bank doesn’t loan money to cooperatives. We are located in Colorado and don’t really know what co-ops are.”
- “If you wanted to borrow money on your own apartment, I can help. But you don’t. You want to borrow on the entire apartment building, yet you don’t own it. Correct?”
- “You already have a loan on your building. What are you trying to do? Pay less interest? Why would I help you with that?”
- “You want to pay off a variable interest loan and take out a low interest 30-year fixed interest loan? Ha-ha. We don’t have a product like that.”
- “You don’t want a product, you want money? Ha-ha. We sell products, not money. They are apples and oranges.”
- “Who do you think you are: A customer for the impossible loan? Try elsewhere.” You get the idea. There still are banks. The banks still lend money. They don’t lend it to you unless you fit into the tight little boxes they create. If you don’t fit into one of the boxes, you are an apple when you should be an orange, or an orange when you should be an apple. It can drive you fruity.