Even Recent Buyers Are Refinancing
Getting a new mortgage rate in 2016 could be a very good idea.
Mortgage rates were predicted to rise to the mid-fours — or even five percent — this year. Instead they dropped to the mid-3s.
Now, homeowners who bought between late-2013 and the latter part of 2015 might benefit from a refinance. Rates hovered at or above 4% for much of this time period.
But these rate shoppers may end up with a better mortgage rate by to calling their current mortgage holder last.
Homeowners should be wary of taking the first rate they are offered. This is especially true for those applying with their current lender. Some lenders have systems in place to retain customers first, and offer competitive rates second.
When it comes to mortgage rates, competing lenders can be a very good thing.
Click to see today’s rates (May 9th, 2016)
Will Your Current Lender Quote Market Rates?
Your lender or mortgage service knows your current rate.
Mortgage lenders understand that their current borrowers could agree to a higher-than-market rate because it’s lower than the rate they have now.
Mortgage lenders employ “retention” staff whose job it is to keep borrowers from refinancing with other lenders.
Lenders know you are looking to refinance if you call about current rates or request a payoff statement that shows the amount needed to pay off and close your loan.
When you call, you may be forwarded to a retention specialist, who is likely to propose an offer based on the rate that you already have – not necessarily the best possible deal.
For example, if the retention employee sees that your interest rate is 5.5 percent, you might be offered 4.75 percent – while a new customer might be quoted 3.75 percent.
The lender “sells” the higher rate with convenience. They could claim that dropping the rate will require less effort on your part. The lender’s strategy pays off in two ways: it avoids losing you to the competition while continuing to earn a higher-than-market rate on your loan.
Mortgage industry news website Mortgage Financing Gazette addresses this issue, recommending that lenders “establish a simple and direct path of action to enable the customer to execute a product switch within minutes and with the least possible friction.”
But for now, a traditional refinance is still the most widely available method of dropping your rate.
Click to see today’s rates (May 9th, 2016)
Check With Your Mortgage Holder Last
The Federal Reserve website says that even after all of the post-recession mortgage reforms, borrowers still have to shop to get the best possible deals. Lenders typically offer better rates if they know there is competition for your business.
Homeowners should approach mortgage shopping like they would buying a car, refrigerator, or any other consumer item.
By obtaining interest rate quotes from several lenders, you’re better able to judge the quality of mortgage offers. Make sure, however, that these quotes are based on your actual scenario, not just an advertised rate from a newspaper or website.
To give you an accurate quote, mortgage lenders need the property location, your loan balance, approximate property value, and your credit score. It’s smart to get your free annual credit report from each of the three major bureaus. The free reports don’t show your credit scores, but you can check for errors and late payments that may be pulling down your score.
Once you have several quotes in hand, you’ll know if your lender is offering you a good deal, or if you should go forward with a different mortgage provider.
When Is It Smart To Refinance With The Same Lender?
Occasionally, your own lender will cut you a better deal than a new one.
They may be able to offer a competitive rate and cut your closing costs. Ask if they will give you a “lender credit” for refinance fees like your appraisal or title report.
In very few cases, your lender might be able to lower the rate on your current mortgage without refinancing. Instead, they charge a relatively small document preparation fee which changes the terms of your existing loan.
However, the majority of lenders today sell the mortgages they originate to investors. Or they keep the loans on their books while selling the servicing rights. In either case, the end owner or servicer of the loan does not have the same ability to alter established loan terms.
Most likely, you’ll experience an application process similar to the one during your last home purchase or refinance.
What Are Today’s Mortgage Rates?
Mortgage rates are much lower than almost any expected in 2016. Homeowners are the beneficiaries.
Thirty-year fixed rates have fluctuated between the high 3s and mid 4s since 2013, but are now approaching all-time lows seen in 2012.
Get a rate quote, and seize this opportunity to get into a very low rate, some of the lowest in history.
Click to see today’s rates (May 9th, 2016)
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
Try the Mortgage Calculatorwill-your-current-lender-offer-the-best-refinance-rate
No comments:
Post a Comment