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Chris Salese

Making its way to the ring from Wall Street, standing tall at three decimal places, is your interest rate.

Coming down the aisle from your loan servicing department, weighing in at several thousand per month, is your mortgage payment.

OK, this is obviously not a real bout of any kind and clearly, it’s a very poor illustration of how a ring announcer might get your “rate” and “payment” excited to fight each other as well.

However, whether it’s a fictitious battle or not, it’s still common to hear about the struggles between an interest rate and a mortgage payment.

For instance, you may have heard of what’s called a trophy rate, which is a super low rate over which your friends and family are jealous.

It could also be a rate that’s not flashy, yet just less than current market rates. Therefore, since low interest rates on home loans typically receive all the glory and attention that they deserve, your total monthly mortgage payment usually gets pushed to the side and left out of the celebration.

Unfortunately, this, in turn, creates potential problems.

If you’re an existing homeowner with a trophy rate, you might be missing out on the opportunity to take advantage of any built-up equity in your home.

While everyone has a different loan application, often those with trophy rates continue to stare at them and default to chasing home equity lines of credit with higher rates instead.

This becomes more problematic when the amount borrowed on your home equity loan significantly exceeds the amount presently owed on your trophy rate loan. At that point, you are likely no longer properly mortgage load balanced.

Furthermore, even if you don’t need or want to extract any equity out of your home, if your current trophy rate loan is amortized over a short period of time, that could pose some qualification issues for you down the road.

As an example, if you plan on purchasing another property or co-signing on a home loan to help a family member, then your higher monthly payment on let’s say your 15-year fixed trophy rate loan could prevent that from happening.

Lastly, unless you have a combination of a large down-payment and a significant amount of reserves, then you certainly don’t want to go after a trophy rate loan if you’re purchasing a home for the first time.

There are bigger things you should consider doing when weighing out your financing options such as focusing on paying off expensive debts in full, saving for retirement, tucking money away into a rainy-day fund or simply improving your credit profile.

Although being able to brag about your trophy rate can be fun, if it’s not attached to the right loan program for you and at the right time in your life, then your trophy rate needs to be replaced with something different.

That said, most of the time lower total debt payments can certainly replace the glory from a lost trophy rate loan.

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Chris Salese can be reached at or 707-363-4439. He is a licensed California mortgage lender (LO NMLS #254469 — CA-DBO #254469 Corp NMLS #1169 Equal Housing Lender.