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Are Current Interest Rates Good For Refinancing Your Mortgage?
With these record-low interest rates, homeowners are jumping to refinance their mortgages. Mortgage lenders are busier than ever with the flood of homeowners coming to them for their refis. As of last month, over 15 million people were seeking to refinance. This extreme demand has caused the system to reach its limit. Many mortgage lenders have begun to prioritize purchases and offer lower rates to attract new businesses. Some mortgage bankers are reported to prefer making purchase-mortgage loans instead of refinances because their loan compensation is a bit higher and there are more opportunities for referrals and new businesses.
The rate loan borrowers receive is completely dependent on multiple factors: credit standing, type of loan, and how much is paid upfront. In the past 3 years, rates of refinances and purchases seemed to stay relatively consistent. However, when the pandemic struck, borrowing costs were pushed down and interest rates for purchase mortgages decreased faster than refis. Multiple mortgage bankers have stated that they would charge lenders an extra fee to buy refis they support. This fee will most likely be included in refi rates. Extra fees added onto refis may be incorporated to the rate by approximately an eighth of a percentage of higher.
Clients that are trying to get low refinance rates are being sabotaged by the extra fee, and have left with higher rates than they were expecting. This extra fee is taxing on borrowers who were relying on these all-time-low interest rates to give them a great deal. At this point, a 30 year fixed rate purchase loan would be a better option than a refi.
Overall, choosing to refinance your mortgage is your decision, and many variables go into the cost of refis and purchase loans, not to mention the variety of prices from different bankers. Choose the option that’s right for you.
To read Ben Eisen’s full article, click the link below.