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Bruce McCoy
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I had a call the other day from someone who wanted to see if their current lender was offering a good rate for a refinance. The borrower had a first and second mortgage with this bank, and they had contacted him about rolling both mortgages together into a new first mortgage. The first mortgage carried an interest rate of just under 6% while the second was currently set at prime rate, or 7.5%. The offer from the bank was for a “no point, no fee” loan in the mid 6% range. At that time, I was able to offer the same loan for just over 6%- almost a half a point in interest under his bank’s rate. He was ready to jump on my offer, but I did what almost any mortgage broker would do - I continued to ask questions and analyze his mortgage needs. His current first mortgage was over $300,000 and his second mortgage was only $35,000. The way the actual numbers on the payments worked out, his second mortgage would need to go to over 13% before it made sense for him to refinance with my rates, let alone if he did it with the bank’s rate!
Needless to say, he declined the bank’s “generous” offer to refinance his “low” interest loan. Mortgage interest rates have risen by about a half a point in the last year and banks are not immune from the resulting drop in mortgage originations. This decline really hits into their profits, as well as the hit in profits because of the low interest fixed-rate loan that your mortgage broker helped you get. Every mortgage is different, and sometimes it does make sense to refinance. Just make sure that you know all the numbers.
Fixed Rates for Conforming (under $417,000) as of 3/21/06 (a.m.) are:
(Rates quoted are for 0 point loans)
30 year fixed: 6.375% (APR 6.449%) payments are $2,601.54/mo.
15 year fixed: 6.00% (APR 6.12%) payments are $3,518.88/mo.