refinancing that makes sense

[promortplanner]

When thinking about refinancing your home a few things must be addressed. The number one compensating factor is net benefit. Refinancing is not free. There are many fees that are involved including what the loan officer charges. So how do you weigh net benefit.

Always start with your current and existing loan scenario. From there evaluate your situation against timeframe. How long do you plan to be in the home? How long do you plan to own the home?

This will help you determine what type of loan products to consider (ARM or FIX). If you goals and outlook for the property are short-term like a possible sell within the next five years - then a 30 yr fix probably won't make much sense for you. The longer the fixed term in your loan the more probable it will be that you'll have a higher interest rate and subsequently a higher monthly mortgage payment.

Always keep in mind as to what you're setting out to accomplish. If you've had credit issues and lower fico scores as a result - acknowledge that you may not have all the options the market has to offer and it make take you more than one refinance to straighten out your current situation. If going into an ARM (adjustable rate mortgage) is your best option for payment and these standard loan programs come with 2 or 3 year prepayment penalties - have your loan officer calculate for the money what it would possibly take to buyout or soften the prepay.

A few things I always tell my clients:


Don't refinance unless you can recoup the cost of savings within 18 months. If the refinance costs you $4K - $6K and you're saving only a $100/month - understand that it will take you a minimum of 40 months to recoup your costs at $4K. Unless you were paying off debt to increase your fico scores and freeing up money by eliminating out going bills - you would need to seriously consider what you'd be accomplishing by proceeding with this loan.
Ask questions and be mindful of unecessary prepayment penalties. If the prospective loan scenario that a loan officer pitches you is adjusting monthly - don't accept a prepayment penalty longer than 1 year. If the market turns and rates go up - A prepayment penalty longer than 1 year at this point could further hurt you by having to come out of pocket with additional money to get yourself back to stable ground if your payments are going wacky.
Make sure doing a loan is in your best interest and not your lenders.Educate yourself, be sensible, and keep it simple. I am the promortgageplanner. If you have any question regarding the meaning of things regarding a particular loan - don't hesitate to call on me at fesquivia@pcmort.com.

[dre67]

Also be sure that you speak with a mortgage broker that can show your offers from multiple lenders and help you make the best decision.

[promortplanner]

A reputable mortgage professional's only purpose is to help thier clients make the best decision based on long-term financial goals, strategies, and interests. That's it!

I'm not sure what purpose showing multiple offers from different lenders would serve the client. Through wholesale channels I have established relationships with lenders for niche products from A to Z including correspondent lending through our in-house banking line. I monitor the market closely everyday and know exactly who's offering the best rates for whatever particular niche product my clients may need.

Any loan professional that I was doing business with who showed me offers from multiple lenders would certainly be suspect. The problem with this business is - in recent years we've seen a large influx of people into this business that came for a quick buck and never got the proper training or don't have the ethics to do the right thing for their clients.

Offers from multiple lenders shows me that the loan professional probably doesn't have the experience or skill in guiding his client to the right loan products available on the market. This business doesn't need anymore order-takers, we need loan officers.

[dre67]

Good point, more important than the actual showing of multiple lenders is certainly being able to find loan solutions from more than one lender. As the market has become and is becoming more and more "nichified" then it is also becoming more important for consumers to speak with someone that is interested in more than just "pushing" their company's hot products upon them.

If you speak to a mortgage broker for the first time then it is always reassuring to know that they can be somewhat objective if they have many different lenders to find loan programs from.

Absolutely, the broker should recommend solutions and guidance as that is what their job demands. However, transparency of pricing is never a bad or "suspect" thing for the consumer.

Any consumer who speaks with a broker that just demands they strictly listen to and only consider his/her in house products is no more than a salesman/saleswoman in the disguise of and independent and objective advisor.

[promortplanner]

I see your point, but transparency on multiple lenders I think is far less important than transparency with actual rate and costs of the loan.

I actually do very little pushing or selling of the companies loan products. I reserve the company product for a client that has a time constraint or needs additional flexibility in some area that can 't get it done other than through an in-house underwriting department. That's it.

I'm approved with 400 lenders to find loan programs, but I'm having a little trouble understanding your "when banks compete, you win" thing.

The actual lender itself has little or no value in the process because most loans are sold on the secondary market before 1st or 2nd payment is made anyway.

Multiple lenders - no
multiple loan options with an accurate estimate of costs - yes

Transparency is the most important thing with regard to disclosure, programs, rates, and costs - I myself will issue everything in writing with 24 hours to all prospective clients.

What I find suspect is a loan officer bringing to the table multiple lenders on the same loan scenario. That is a clear sign of inexperience and to me a loan officer that doesn't have the confidence needed to cut it as a true loan professional in this business.

People come to me because I do the shopping for them and I make the loan process simple. People come to me because of my knowledge, experience, great pricing, and ability to close in the loan market.

The loan business is a service industry - not a commodity market. If you want to commoditize yourself in this business -by all means. My suggestions would be to consider another route - that's a long tough road. It creates shopper clients who ultimately never make the right decision, eventually have a terrible experience with the loan, and have trouble ever trusting the loan process again. Making your job much tougher!

I recently went to Hawaii and snorkeled in a natural fish preserve. I was interested to find out that they didn't allow you to feed the fish because of its potential to breed agression into the fish. The fish forgets how to feed itself naturally and becomes especially agressive with people looking to be fed. The fish loses by being killed off for agression or becomes weak from lacking the ability to feed itself naturally. It's strange how similar I found that experience to consumers in the refi market that have been fed the bull from "when banks compete, you win" concepts.

Find unique value propositions, sell benefit, and don't feed the monkeys.

[dre67]

Very true, many people underestimate the value that an experienced and trustworthy mortgage broker or other advisor can have.

[OregonLO]

I skimmed through some of the material you guys discussed. Sometimes I think us mortgage brokers have a bad rep. People think we're just after their money because we work off of commission. I'll honestly tell someone if I think it is a bad idea to refinance their home.

another thing I like to point out when someone wants to pay off debt is the high interest rates they are paying to the credit cards...etc. Also if you put that money into interest in your mortgage which usually tends to be 1/3 of the interest rate they are paying on their CC's they will get the tax write off on it as well. So it has added benefit. I agree with you planner, if they can't recoup the cost of doing the loan within the first 18 months maybe 24 at the max (and that is if they plan to be in the home for the next 10 years) then it just isn't the smartest idea. If I can't save them a couple of hundred dollars or more a month I tend to tell them not to do it. Unless it is credit scores holding them back then I help them raise the scores over a 6 month course and then look at the file again.

Its amazing the response I get from people when I help them set up a plan to raise credit scores. People tend to refer people to you when you show that you care and want to help them with their situation.