You are your most valuable asset. I explained to you the mental checklist you should examine when setting goals. First on that list was being out of debt. In America that usually means owning your home, outright.
I suggested you get rid of your mortgage, or at least do a refi to a 10 or 15-year mortgage that will make you a real homeowner sooner rather than later.
The financial media have been shouting from the rooftops about the record low mortgage rates available today. But you need to be careful if you’re pursuing a refinance mortgage.
Ben Eisen explains at The Wall Street Journal that banks are giving priority to home buyers, over refinancers, with their best rates. He writes:
The average rate posted on Bankrate.com for a 30-year fixed refinance mortgage was 3.39% Monday, well above the 3.14% on offer for a purchase mortgage, according to the personal-finance website.
The rate premium for refis over purchases widened this spring after the coronavirus pandemic shut down the economy and pushed interest rates lower across the board. The spread grew even bigger after Fannie Mae and Freddie Mac last week levied a new fee on lenders for most refinancings to shield themselves from potential losses.
Mortgage lenders are still dealing with a flood of homeowners seeking to refinance, and some in the industry are struggling to keep up with demand. As of last week, nearly 18 million homeowners could still save money by refinancing, near an all-time high even after months of record low rates, according to mortgage data and technology company Black Knight Inc.
“The system is maxed out,” said Sam Polland, a mortgage-loan officer at Sandy Spring Bancorp Inc. in Rockville, Md. “Everyone is in this bad but good position.”
With so much demand, some mortgage lenders are prioritizing purchases, often offering lower rates to grab new business.
Some mortgage bankers say they prefer to make purchase-mortgage loans over refis. Their per-loan compensation is typically a bit higher for purchases, according to mortgage-technology company LBA Ware. Financing home purchases also can often lead to more business through referrals and refis down the road. Refinancings, on the other hand, come and go with rates.
Action Plan: If you are refinancing, shop around. A little extra work could save you a lot and make you a real homeowner much faster.
