Many mortgage lenders are changing their marketing strategies and are focusing on homeowners with adjustable rate mortgages. These lenders are marketing fixed interest rate loans hoping to capitalize on recent interest rate hikes and uncertainty in the economy.
Many homeowners in the United States used adjustable rate mortgages to lower their monthly payments or purchase homes they could not qualify for with traditional financing. Now that short term interest rates are climbing higher than long term interest rates many of these homeowners need to refinance.
Mortgage interest rates are currently averaging 6.27% for a traditional 30 year fixed rate loan. This is still extremely low by historical standards. The advantage of locking in this rate with a traditional mortgage is you are guaranteed your interest rate will not change for the duration of your mortgage.
This latest marketing blitz by mortgage lenders follows a decline in the number of mortgage loans processed and intense competition between lenders. Mortgage lenders have seen their profit shrink as the volume of loans has decreased. In an attempt to drum up a little business and keep the mortgage boom going these lenders are desperate to refinance your mortgage loan. As a result, you could walk away with a fantastic deal on your refinance. Remember, the interest rate you receive is not the only factor that makes a mortgage a good deal. You can negotiate for friendly terms and lack of fees.
Refinancing your mortgage makes a commission for your loan officer or broker. The lender itself loses money when writing your loan; their money is made by servicing the loan and collecting interest. Some lenders make money by selling your loan to another lender. Right now mortgage lenders are pushing refinancing options because they don?t want to lose your business to another competitor.
If you are on the fence with your decision to refinance your mortgage you need to consider several things before making a decision. First, how long will you be staying in your home? You need to stay in the new mortgage long enough to make up your expenses from refinancing. Before shopping around for the best deal you should do you homework and learn how the industry works. Our guidebook to mortgages and mortgage refinancing will help you do just this, and it’s free.
To learn more sign up for our free guidebook: “Five Things You Need to Know Before Refinancing Your Mortgage.”
My name is Rob Regehr and I’m a personal finance writer with a chip on my shoulder for banks and brokers that take advantage of my friends and neighbors.
