Yesterday we received our mortgage papers in the mail and drove over to Fed-Ex to have them notarized. As we flipped through the pages in search of signature flags and notary signs I came across a document called the occupancy affidavit. In essence, it stated that we would need to claim the property as our primary residence within 60 days of closing.
Since the property is our second home the document was clearly false. My husband and I could have signed the papers and closed on our mortgage, but we didn’t. Instead we called the credit union to let them know the loan application was incorrect. The loan officer informed us that loans for second homes cost .25% more than loans for primary residences.
A .25% increase on a $417,000 mortgage will cost us $9729 over the life of the loan.
It’s great to see morality in action frugal girl! Sometimes it’s easier to just take the easy way out, especially when someone else makes a mistake in your favor. I know I’ve done it before, so I commend you for your honesty.
You did the right thing, but I’m not sure it’s fair to characterize it as having “cost you $9729.” That money wasn’t yours, right? You might have gotten away with taking the benefit, but then again designating two primary residences might have gotten you into trouble down the road.
I think it’s best to take the honest approach anyway. Like anon said, trouble would have probably found you had you not done the right thing. You’d have had a longer nose before long. š
Reminds me of the time my kid slammed his door open on a parked car next to us. We could have just left, but we waited and arranged payment for the body work. Then I made him work it off. (well, as much as a 7 year old can “work”) It was a valuable lesson in honesty and taking responsibility for his actions. (we’d always told them to open doors slowly)
Yup, I think it’s great that you did this, because other wise it would be mortgage fraud. You can always move into it later and get the rate reduced.
That’s great! Great that you were honest, I mean.
I agree it cost you $9729. But like others have pointed out, how much would NOT doing the right thing have cost? Perhaps more than you might think. You wouldn’t have a legal leg to stand on if anything goes wrong with the mortage, and the fear of being “found out” might skew other financial decisions. For example, you might be afraid to file an insurance claim later or to refinance again, for fear that an examination of the property/mortgage could result in penalties to you. And what if your taxes are audited in detail? The IRS might find two principal residences to be very interesting!
No, you clearly did the right thing.
I’m amazed at the dishonesty that some of my friends show when money is involved. Even without factoring in the poor ethics, it always strikes me as financially unsound. For example, I have a friend who repeatedly let’s his son walk into a grocery store, eat an apple in the store, and not pay. He explained to his son that “it’s not a big deal because Safeway is a big, big company and $1.50 is nothing to them.” So he thinks he’s saving a few dollars on apples? But how much does he stand to lose when the same kid gets caught shoplifting an iPod from Wal-Mart while thinking to himself, “$200 is nothing to a company the size of Wal-Mart…”
The anonymous commenter is correct I owe every bit of that $9729 because the home is not my primary residence. (At least not for a few more years.)
@mr. debtbeater — I wish more parents would teach their kids the value of taking responsibility for their actions. Then maybe we wouldn’t have so many irresponsible adults.
@s.b. — I agree with your sentiment. I think a lot of other borrowers would have signed the papers and walked away with a better interest rate. But not me… I couldn’t have mortgage fraud weighing on my conscience.
A quarter point is nothing on a second home, and $9729 is a drop in the bucket when you look at the overall interest you’ll pay over the life of the loan.
And you’ll sleep better at night knowing the bank can’t come ding you for not claiming the property as your primary residence.
Being able to sleep soundly at night is worth a lot more than $9729, trust me.
-Grant
You did the right thing.
I used to be IN real estate, and you’d be surprised the number of brokers who would pull this very trick on unsuspecting people to make it look like they were getting a heck of a deal.
This can amount to insurance fraud, if you take out title insurance on your second property. It can also void your loan, meaning it’s immediately due and payable. On top of it, you can get put up on charges and sued by the state for trying to get around the legal system.
Sucky business, all that. Be careful!
There’s nothing wrong with doing the right thing. You made a wise decision.