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Davie Home Finance, 115 Donna Rd NE, Palm Bay, FL 32907
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Purchase vs Refinance
Beware of the Bait and Switch.
I am always doing more research. As a Mortgage Broker, I must keep up with
ever changing trends in our industry. There are always new regulations, or
economic indicators that we as professionals need to keep up on. One of them is
the retail rates of major banks. These are advertised rates that homeowners like
ourselves can go see to compare when we shop. We need to know we are
offering a great deal to our customers that the banks cannot.
I was aghast to see that many banks were offering the exact same rate as I am
currently getting wholesale from the many lenders I do business with. If the banks
are offering the same rate –then what is the point of using a Broker as a
‘middleman’? True, we offer customer service, take the whole loan from
application to close for our clients, and offer professional advise to homeowners
in which direction to take.
But what about the savvy homeowner who will put up with all the hassle and do it
themselves, as long as they get the best rate? Save my fees in the process.
So I went online to one such bank and input my information. Excellent credit
score, expected loan to value, average loan size, 30 year fixed. What did I find? I
had been tricked into the old ‘Bait and Switch’.
You see, this bank, and most others, don’t offer the same rates when you
refinance your home vs. purchase a new one. Furthermore, the rate gets even
uglier when you decide that you want to take cash out instead of just refinancing
the first mortgage. Cash out includes paying off second mortgages, all credit card
and other debt, and actual cash in hand. In this particular case, my ‘quoted’ 5.75
% turned into 7.25% all of a sudden. The advertised rate was for purchase only
with 20% down.
I came to the conclusion I wasn’t alone. Many homeowners must erroneously
believe they can just go online or talk to their local bank and beat the system. Yet
when they get down business, they sadly find out the reality.
Quite often, they are already into the process and have their heart set on
refinancing. Thus they just accept the new rate as long as it’s a better deal than
they have with all their current debt. The ‘Bait and Switch’ is quite successful
indeed.
This is why nearly 80% of all mortgages are now completed by Mortgage Agents
working for the homeowner, instead of the homeowner trying to go to bat
themselves. Why? Mortgage professionals get wholesale rates that are good for
any reason. We know the industry and will not have our clients put into any old
loan that the bank tells us to. We have hundreds of banks to choose from, so quite
often the lender bends over because they know we will take them elsewhere.
Acting as the agent for myself, I then took my exact same scenario to my
wholesale lender who does not deal with the public directly. The same information
I gave the bank nets me a cash-out rate of 6.375% fixed for 30 years. I can do
whatever I want with the money. I added the 1% traditional mortgage broker fee –
and the other usual suspects in closing costs, I calculated that a $200,000 typical
loan would cost 6.59% APR, meaning all costs rolled into the loan like it was ‘no
cost’. Not bad for everything being done for me and bringing nothing to close. The
lesson we can all learn is that there is no ‘free lunch’. Beware of the 'bait and
switch' in advertised rates.
(Rates quoted in this article are subject to the changing market and presume up
to 90% loan to value cashout. Lower rates available on 80% or less loan to value )
Beware of the Bait and Switch.
I am always doing more research. As a Mortgage Broker, I must keep up with
ever changing trends in our industry. There are always new regulations, or
economic indicators that we as professionals need to keep up on. One of them is
the retail rates of major banks. These are advertised rates that homeowners like
ourselves can go see to compare when we shop. We need to know we are
offering a great deal to our customers that the banks cannot.
I was aghast to see that many banks were offering the exact same rate as I am
currently getting wholesale from the many lenders I do business with. If the banks
are offering the same rate –then what is the point of using a Broker as a
‘middleman’? True, we offer customer service, take the whole loan from
application to close for our clients, and offer professional advise to homeowners
in which direction to take.
But what about the savvy homeowner who will put up with all the hassle and do it
themselves, as long as they get the best rate? Save my fees in the process.
So I went online to one such bank and input my information. Excellent credit
score, expected loan to value, average loan size, 30 year fixed. What did I find? I
had been tricked into the old ‘Bait and Switch’.
You see, this bank, and most others, don’t offer the same rates when you
refinance your home vs. purchase a new one. Furthermore, the rate gets even
uglier when you decide that you want to take cash out instead of just refinancing
the first mortgage. Cash out includes paying off second mortgages, all credit card
and other debt, and actual cash in hand. In this particular case, my ‘quoted’ 5.75
% turned into 7.25% all of a sudden. The advertised rate was for purchase only
with 20% down.
I came to the conclusion I wasn’t alone. Many homeowners must erroneously
believe they can just go online or talk to their local bank and beat the system. Yet
when they get down business, they sadly find out the reality.
Quite often, they are already into the process and have their heart set on
refinancing. Thus they just accept the new rate as long as it’s a better deal than
they have with all their current debt. The ‘Bait and Switch’ is quite successful
indeed.
This is why nearly 80% of all mortgages are now completed by Mortgage Agents
working for the homeowner, instead of the homeowner trying to go to bat
themselves. Why? Mortgage professionals get wholesale rates that are good for
any reason. We know the industry and will not have our clients put into any old
loan that the bank tells us to. We have hundreds of banks to choose from, so quite
often the lender bends over because they know we will take them elsewhere.
Acting as the agent for myself, I then took my exact same scenario to my
wholesale lender who does not deal with the public directly. The same information
I gave the bank nets me a cash-out rate of 6.375% fixed for 30 years. I can do
whatever I want with the money. I added the 1% traditional mortgage broker fee –
and the other usual suspects in closing costs, I calculated that a $200,000 typical
loan would cost 6.59% APR, meaning all costs rolled into the loan like it was ‘no
cost’. Not bad for everything being done for me and bringing nothing to close. The
lesson we can all learn is that there is no ‘free lunch’. Beware of the 'bait and
switch' in advertised rates.
(Rates quoted in this article are subject to the changing market and presume up
to 90% loan to value cashout. Lower rates available on 80% or less loan to value )
| Call Today!! (321) 373-4659 (866) 319-2998 toll free |