In that same vein of wanting to get paid now, the refinance racket is not interested in your big picture.
Yes, I know, it definitely has felt like a “boy who cried wolf” scenario when the industry has been hoping for rates to reduce for so long, but this inflation economy proved stubborn, and 25-year high mortgage rates have prevailed. However, the boy who cried wolf was eventually right, and if we follow the inflation impact trends during the 70s and 90s, then at some point, these interest rates could in fact come down.
With the market now currently sitting at 18-month low mortgage rates and with the Federal Reserve’s first rate cut of this cycle during their mid-September meeting – we could very well be at the beginning of the lower rate cycle many have been waiting for.
Certainly, buyers are buoyed by this news, and we strongly encourage buyers to review our articles in the last year as far as anticipated pricing impact associated with potential higher demand in a lower rate environment. This month, my focus is on the current homeowners that have been patiently paying their mortgage and waiting for refinance relief in a lower rate shift.
Relief does seem near as we evaluate the economic signals, but it’s then more critical than ever to truly understand your goals, the market and the business of refinancing so you don’t get burned by the refinance racket!
What is the Refinance Racket?
An educated consumer is the best consumer, so here’s a few things you should know. It is public record that you purchased a home when you did and the amount of a loan that you initially took on. The mortgage industry has been dealing with some lean years with home purchases at near 30-year lows and would love nothing more than to solicit a bunch of refinance transactions to boost their balance sheets before year’s end.
What do all these factors add up to? Your mailbox, email and phone may be about to blow up with all sorts of “refi now” solicitations. You’ll hear from your servicer, from your original lender and from just about any telemarketing style refinance center that can figure out how to get their hands on your contact information. They will all lead in with one pitch: payment savings. That’s what you want, right? And that’s where you feel the most pain, right? The issue here is that they don’t typically look at the big picture, ask the right questions or care to fully explain their cost or market trending until you are already handing over your social security number and too hastily clicking through their initial e-sign disclosures.
Despite some of the disingenuous terms they may use, it can cost money to refinance and it can cost extra money to achieve a specific lower interest rate. It’s not great math to save $150 to $200 per month if you’re paying $5,000 to $10,000 in added loan amount to get that savings! Not only that but if you get to a low-cost refinance solution and can save a decent amount – the refinance racket couldn’t tell you what economic news next week or next month could benefit you even further.
I know, no one has a crystal ball but if experts are predicting upwards of a 2% rate dip over 24-36 months, then timing could mean a lot to you. The refinance racket loves to get paid now and is not interested in you saving an extra $50 per month ($600 per year!) by just waiting a little longer and closely monitoring the market. In that same vein of wanting to get paid now, the refinance racket is not interested in your big picture. How close are you to eliminating mortgage insurance and how could patience with equity growth play out better with refinance timing? Would a shorter-term mortgage fit better within your overall financial goals? Do you need to address a strategy that would help you access cash for debt consolidation, renovation or other life goals? Or, one of my favorites, in this lower rate market, do you actually now want to sell?
I can’t tell you how many people I’ve spoken to that ended up moving within a year of their refinance and depending on the cost of that refinance, the savings may have not yet outweighed the cost. Here’s the bottom line: It is important for the consumer to know that there are many institutions out there that would love to make money on your loan refinance as a priority and your actual benefit, savings and big picture are only a passive potential consideration.
Expert Navigation Ahead
Mortgage rates, just like other markets, don’t move in perfect linear patterns. We could see a couple-of-days or week window of .5% lower rates in the months to come just to be followed by weeks of moderately higher rates. Timing can be critical when it comes to watching for the best deals. This inherent nature of the market will make it very tricky to navigate. A true expert loan officer is going to have their finger on the pulse – they should be able to tell you what the Mortgage-Backed Securities (MBS) market has been doing and what the next week and next month economic outlook is, with their anticipated impact to the MBS market and interest rates.
A true expert will also be very transparent on the refinance cost and help you run a cost-benefit analysis. They’re going to also ask questions on your financial goals and future long- and short-term intent with the home. Ideally, they’ll use enhanced software tools to project different options for rates, costs and length of term, and can help you calculate and see the difference and financial implications of each scenario in real time.
Not Just a Refinance but a Game Changer
The significance of waiting a few weeks or months to get the “right deal” could very easily have five-figure impact to your financial trajectory. This could easily change the timing of your renovation, how you’ll mange paying for your kids’ college, when you decide to start that business, or when you decide to call it and retire! While the racket plays this down as a quick payment gratification game, please, do yourself a favor, don’t fall victim to the telemarketers. Seek out true experts and ensure that you are in the best debt management solution for your best future. FBN
By Chris Hallows
For additional information or to schedule an appointment visit ChrisHallows.Benchmark.us or call 928-707-8572. The Flagstaff location is 824 W Rte 66 Suite A-3.
Chris Hallows is the Branch Manager & Sr. Mortgage Advisor of Benchmark Mortgage Flagstaff. NMLS 306345 Ark-La-Tex Financial Services, LLC NMLS 2143 |Equal Housing Lender