I’ve just received three letters making mortgage refinance offers from companies I’ve never heard of (which is not difficult – I don’t have much knowledge of the mortgage industry). They seem to know some facts about me – like my name and the sale price of my house – and the initial details they give about their terms look attractive enough to me to want to find out more. How do I find out whether these are reputable/trustworthy companies?
They are –
– Angela Mills of Apex Financial Services LLC, Clearwater, Fla./Apex Mortgage Services, Columbus, Ohio
– Bob Smith of Oxford Lending Group LLC, Columbus, Ohio
– Best Internet Rate Mortgage Co. (no address, only toll-free telephone number (800) 400-2320, but it mentions “State of New Jersey Department of Banking and Insurance/Pennsylvania Department of Banking LO41049”)
It’s important to understand that it’s unlikely any of them can offer you anything others can’t. That’s just not how the industry works. Let me ask you a couple of questions:
Do you currently have an FHA mortgage?
Do you have an adjustable rate mortgage?
Were you thinking of refinancing already?
Are you happy with the broker (not the current servicer) that you used for the mortgage you have now?
I have no idea whatsoever why you think you should compile research on the junk mail coming into your house. I get 5 - 10 of those a week. Mortgages are pretty straightforward (well not for lots of people people but they are if you have 1/4 of 1 small section of brain left).
If you think refinancing might be a good idea for you the do some research on banks you pick. Start off by just checking the 30 year fixed rate that applies to you on any major bank’s website. If it looks like something you should do, then shop around to fine tune the details. However, no one is just going to send you a mortgage offer you can’t refuse. Mortgages are largely standardized and easilly comparable across banks.
Personally, I would toss them in to the trash or shred them. Responding to them would be like going responding to a m0rtgag3 r3f1nanc3 offer that appeared in your email box.
If we wanted to refi our mortgage, we would check out some reputable banks and see what offers they currently have.
You need to decide on what YOU want in a refinancing, not what THEY can give give.
What are you looking to get out of a refinancing? Shorter term? Longer term? Fixed rate? Teaser rate? Lower interest rate? Smaller payments?
I’d say if your already locked in at a 5.5-6% or better and are comfortable with your payments then do nothing. If you need some breathing room and want to stretch out your term (you’ll pay more in the long run) then refinance to a longer term. If you can afford a higher payment then refinance to a shorter term.
Be aware also of how much they want to charge you to refinance. Of course they’ll just add that cost into your loan but your still going to pay for it.
Look at where you stand now versus what’s available and plug some numbers into a mortgage calculator on bankrate.com. and figure out what your really after.
And don’t forget one of the tricks…
Let’s say you have a 150,000 mortgage and the payments are $1200/mo.
You get a letter saying they can refi you for 150,000 for only $600/mo for the same term (30 years). Most likely, what they are offering you is an interest only mortage. Sure you’ll only be paying $600/mo, but at the end of 30 years you’ll still owe $150,000 and they’ll be expecting to collect the balance now. Oh, and that $600/mo will fluctuate with the prime rate. Interest only loans (or ARMS) are designed for people that are planning to sell their house within the next few years and are willing to sacrafice equity in the house for lower payments.
I always round-file those unsolicited mortgage offers. It’s highly unlikely they can offer you anything another company can’t, and the ones I’ve seen tend to talk about unrealistic monthly payments which I know are not for real. Even if they weren’t… WHY would I trust a total unknown with something that important?
I think they must troll the county real estate records, which which are public records and show the mortgage holder etc. (we started getting numerous offers just after we refinanced 4 years ago; I think you and I live in the same county). Always labelled with something like “Important information about your mortgage!”. What was especially frustrating was when we’d get things like that, CLEARLY labelled with our current primary mortgageholder - we have a HELOC with our credit union and the primary mortgageholder wanted us to ditch that and open one with them. We couldn’t just toss those offers because what if they were something imporant. Grrrrrr.
I was really, really hoping that not all the mail solicitations were BS Isn’t there something out there between pie-in-the-sky offers and the typical mortgage? I thought the free market and competition would lead to better options for homeowners.
Lending is a pretty standard thing. For a typical 30 year loan,
Banks borrow at X%.
They lend at Y%. (Y > X)
They determine “Y” by the risk they assign (through FICO, or Experion, or whatever) to the borrower. All lenders can pretty much borrow at X, and they all use pretty much the same formulas to arrive at Y.
No one is going to cut you a big deal on Y. If 8% is the 30-year rate on a 650-rated borrower, you’re not going to get 6%. No matter if you’ve turned your life around, found Jesus, really mean it this time, or whatever.
What makes it confusing is that there are all these companies out there who still borrow at X, but in order to get the “privilege” of lending to you at Y they’ll offer you generous introductory offers (and then really lend to you at Y and then some).
What’s important is that they have your business for those 30 years. It’s not a big deal for them to hand out a couple free months on the front end of a 30 year loan (especially if the juice is running). They just want to be the one who gets your business.
Controlling broker or lender compensation (markup)
They get the same wholesale rates from the same lenders, although different lenders may offer better pricing for rates than other lenders. A problem with the system is that the broker’s incentive is to find the best deal for the broker–not the borrower. So finding a broker you can trust is important, but hard to do. You can’t get the wholesale rate by going around the broker the lender will charge you retail, just like any other business.
Yep. And they’re all working with that same X%. It’s based off the prime rate set by the Wall Street Journal and that in turn is set based on the fed fund rate which is set by the Federal Reserve Bank
You want a better deal on your mortgage? Wait for the government to drop the fed fund rate.
Isn’t there something out there between pie-in-the-sky offers and the typical mortgage? I thought the free market and competition would lead to better options for homeowners.