Should you have an account at the bank that owns your mortgage?
My refinanced mortgage was resold to a major bank that has a local branch within a few miles of my house. I currently have a few different bank accounts but none at the bank that now owns my mortgage note. Initially I thought this might be a good excuse to put some money in that bank, figuring that if there were ever any banking disruptions, it might be beneficial to have both credit and debt to the same financial institution.
Upon second thought I am not sure that it is a great idea. A few years ago I was employed by a major bank which I also had an account at. A few months after I quit I still had my account there and without notification, the bank went and took 4 figures out of my checking account because they claimed to have over paid me on vacation time. Needless to say I was quite upset by this.
I think it may be safer to keep my debts and credits at separate institutions. I figure as long as I have access to several financial institutions, I should be able to make any required payments unless they are all closed for some reason. If there is a bank holiday and payments are suspended, it might be better to not have an account at my mortgage institution because they might just do internal transfers without my approval.
Can anybody think of any pros or cons to having a checking account at the bank that owns your mortgage?
Someone here suggested(don’t remember who) to have your mortgage with one of your banks in case of a banking problem. Sounded like a good idea, but the problem with that thinking is that banks always seem to sell the mortgages to someone else. It’s happened to me twice, and both times with my main bank – once on the initial mortgage and again on the re-finance. I’m currently working on the tri-fecta with the same bank – we’ll see if it happens!
I think what you suggested, and what I am doing as well, is a perfectly reasonable course of action which is to have money at several different institutions in case there ever is some sort of banking event.
I keep my accounts at separate institutions for the same reason you mentioned above. Once upon a time it made sense to establish a “relationship” with your local bank so that they knew your financial position. Now it is best if none of these banksters have a good handle on you.
I’ve thought about this as well and really don’t know the right answer. I’ve decided (esp with all the confusion and debating about inflation/deflation), to just pay off my mortgage. That way I know i’ll get the use out of my dollars that have been sitting idly in the bank.
I am inclined to believe that if your mortgage and depsit accounts are at major banks (Chase, Bank of Am., etc) then it probably doesn’t matter at all, beyond the issue of that bank being able to do internal transfers with your money. As you point out, we can imagine that to be a “pro” or a “con,” depending on the circumstances. With the big banks, everything is bureaucratized and out of the hands of the branch managers, who have no incentive to give you personal attention of any kind.
But if you do business with a small community bank, then building a good business relationship with the bank still matters. If you have been a “good customer” of a particular small bank for many years, with reasonable balances on deposit in checking and savings accounts, CD’s, etc, the bank will very often be willing to accomodate you in ways that they would not do for a non-customer.
They may not have much room to maneuver on their interest rates for secured loans, but when it comes to things like forgiving payments, deferring forclosures, extending small lines of unsecured credit, making accomodations for the needs of a business owner, and working with you in other ways, having an established relationship with the bank as a long-time depositor really does count. Not to mention that a small bank manager will naturally feel more comfortable being generous with a person whom they know has cash on deposit. So, if you do business with a small bank, then I would definitely have accounts with the same bank that extends me credit.
Holding Savings and a mortgage note at the same bank.
It seems like there could be a possible benefit in being able to quickly pay off the mortgage via an account transfer in the event of a banking crisis.
Anyone have thoughts about that line of reasoning?
True story: a dear friend had an account with a bank that sold his mortgage back and forth so that he could not debate extra fees and late payments. When he refinanced he went with a bank that promised not to sell his mortgage, as long as his payments were automatically deducted from his checking account.
You can get morgages that are guaranteed not to be sold, but you have to ask for them.
My mortgage in January was sold to US Bank before closing and then to Freddie Mac before my first payment. I’m not sure I’d keep money at MacBank.LOL
The $64K question for me is what happens if you have your mortgage within a bank that then fails as a result of a massive systemic banking failure?
It looks like bail in, rather than bail out, will be the order of the day, and if so, then you don't want to have your savings within the financial system. But the mortgage is debt, and as long as you're willing and able to pay it back, according to the original contract terms, then does it really matter that the bank fails?
The contract terms will be that your house can be repossessed, but only if you fail to meet the terms, so your asset should be safe. It would also be difficult, surely, for a future owner of your income stream to vary the original contract terms, without your say so.
But am I missing something?
In 1933 my grandmother had 3 savings accounts in 3 separate banks and owed a small note at a 4th bank. Guess what? Her savings vaporized, but the note was still valid. She never trusted the banking system again. Granted, 1933 was a catastrophe for many people.
Are you aware that any bank loan can be called at any time? During the farm crisis of the early 80's many farmers were shocked when banks called their loans to be repaid in 30 days. Other borrowers were forced to pledge more collateral to make the banks balance sheet look more proper.
My point is that your money situation is completely dependent upon how bad it gets. One thing is certain: In a bad financial situation banks and the banking system will attempt to survive at any cost and you may be trampled in the process.