Wednesday, March 22, 2023

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Is it worth using a mortgage lender now to promise future fee waivers?

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Mortgage rates are not as cheap today as they used to be. And that’s the understatement of the century.

Fixed price for 30 years is the current price. about 7%This is more than double the ~3% rate proposed in early 2022.

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That has left mortgage lenders struggling to distinguish themselves from the crowd among the pool of qualified borrowers.

we have seen temporary purchase It has gained steam lately, where interest rates drop in the first year or two, typically paid by the home seller or lender.

Another common strategy is to waive lender fees on subsequent transactions. The mortgage rate is expected to improve. But is it a good deal?

Use a mortgage lender now that promises no fees later?

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Some mortgage lenders offer a lender fee when you apply a second time.

think it is “Mortgage Loyalty Program”

For example, choose them as your lender today. and you will get a chance refinance In the future there will be no general fees.

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This means that they will waive any fees charged, e.g. Loan origination feedistribution and processing fees and others.

In general, third party fees such as title insurancecredit information report; and home appraisal will still be charged.

However, this may save thousands depending on the loan amount.

On a $500,000 mortgage, the 1% loan origination fee alone is $5,000. Add a few thousand more for insurance/operation and your savings are quite significant.

This is the pitch some lenders throw out. And all of this is rooted in the idea that these high mortgage rates are temporary.

you Dress up but date rate…and when mortgage rates start working again They will take you for free.

It sounds cute, but is it really? Will rates really go down? And will this lender offer the best price in the future?

Hey, will they still be in business for the next few years? There are many unknowns here. and because of this It would be better to focus on the present moment.

Focus on saving today. not future savings

Whenever I shop Whether it’s a microwave, a car, or a house, I’ll focus on the present.

How much can you pay today? How much can I currently save? because I don’t know what the future holds My decisions are therefore driven by the present.

With regards to home loans, things can get even more complicated. It’s a much bigger purchase and will last you a long time.

In addition to things beyond my control, such as Direction of future interest ratesMy own situation may change.

I might not even be able to keep my property. Or I might not qualify for a future mortgage. There is a lot of uncertainty.

and as specified I don’t know where mortgage rates are going. They can go further and higher. That would diminish the expected benefits of refinancing.

or as mentioned My original lender did. close the doorSo what’s the benefit of being free of mortgage fees from non-existent companies?

The point I’m trying to make is that I won’t put on a lot of weight in the future. Save it. A lot can go wrong between now and then.

I would like to have the best deal in my pocket today.

Absolutely do not pay the discount fee now. If you plan to refinance soon

If you happen to go with a mortgage lender who offers a Refinancing at no cost In the future, make sure they can compete today.

You don’t want to overpay for potential savings later. If they are the lender with the best price right now. Of course it’s the icing on the cake.

But take a closer look at your prices. One of the things that many lenders do these days is multiple discount points.

They are a form of prepaid interest That lowers your mortgage rate. So you pay a few points and get a say rate of 5.99% instead of 6.75%.

Of course it’s a cheaper rate. But you have to pay when closing the account. And points can be expensive depending on the loan amount.

The worst is If you refinance before the breakeven points are paid You will lose your expected savings.

Simply put, if you expect to refinance sooner rather than later. Paying out points might not be a good deal.

Things make sense when you lock in a long-term mortgage interest rate. This is because the savings usually take a few years to bear fruit.

Most economists and lenders expect mortgage rates to fall in the near future. This supports the idea of ​​future refinancing. (possibly free of charge) but do not lose points.

Read more: How quickly can you refinance your mortgage??

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