Second of two articles on refinancing your home loan.
Financial sharks and birds of prey are stalking borrowers in the world of “Mortgageland,” experts say, and the goal of every borrower seeking to refinance should be to graduate from home-loan school and learn to swim and fly around them.
“The worst thing a family seeking an affordable deal to refinance their home loan at a good interest rate is search the internet,” warned Brian M. Bockholdt, assistant vice president and mortgage sales leader for The Huntington Bank Home Mortgage based in suburban Downers Grove.
“If you go to Lending Tree that’s where the home-loan vultures fly,” said Bockholdt, a 25-year mortgage professional. “Lenders are paying for borrower leads. They will hound you, and hound you.”
That’s exactly the experience one homeowner recently had while seeking a good deal on a refinance for his North Side house after his current lender boosted his interest rate to 4.75% from 3.625% when his seven-year adjustable rate mortgage rolled over.
Searching for a better deal, he logged on to LendingTree.com, gave his personal information, and was immediately bombarded with “Robo” phone calls and emails from a half dozen lenders urging him to refinance with them.
One articulate, fast-talking loan originator from Troy, MI-based AmeriSave Mortgage, called the borrower’s cell within minutes of the internet inquiry. He quickly quoted a 3.625% rate on a new “cash-out” seven-year adjustable-rate mortgage.
The loan man promised “no loan preparation fees, a 30-day turn time and an interest rate lock with a float down” if rates moved lower. The maximum loan amount could not exceed 70% of the appraised value of the property.
If it sounds too good to be true, it likely is. Under terms of the hypothetical $480,000 loan, the lender said the borrower would have to pay a minimum $3,701 in closing costs, which typically includes appraisal and title charges, county recording fees, and “points,” or special loan fees lenders can charge.
However, on a cash-out loan the closing costs could rise to $5,300. That’s a huge amount of loan fees.
Luckily, the borrower’s Realtor received a sales pitch from The Huntington Bank Home Mortgage, which recently entered the Chicago-area home-loan marketplace. Huntington Bank, a $100-billion institution, is the biggest bank in Ohio, and it also has a strong business presence in Michigan.
Huntington Bank’s marketing plan is targeted to building a loyal client and customer base in the Chicago area by offering below-market mortgage interest rates, coupled with low or zero closing costs.
The bank also offers borrowers a lower mortgage interest rate if they are willing to become customers of the bank by pledging funds and opening new money-market and checking accounts.
Another unusual feature is Huntington Bank will make “portfolio loans,” which means your mortgage will stay on their books and be serviced by the bank, not sold to Freddie Mac or Fannie Mae in the secondary loan market. That’s a very good thing.
Even when Huntington “sells the paper” to Fannie Mae or Freddie Mac, Bockholdt said it still services the loan and borrowers make their monthly payments directly to the bank.
Here are the terms of the new $497,000 Huntington Bank cash-out seven-year ARM offered to the North Side homeowner:
• A rock-bottom 2.85% interest rate amortized on a 30-year schedule. The rate is locked for 30 days and has a float down provision.
• The rate is 0.775% of 1 percentage point below the going 3.625% rate for a seven-year ARM-and a whopping 1.9% below the 4.75% rate which the borrower was paying on the rollover loan.
• To lock in this below-market rate the borrower agreed to open a $25,000 money-market account at Huntington Bank, 4012 N. Pulaski Ave. in Chicago’s Irving Park neighborhood.
Plus, the bank offered a sweet, above-market 2% interest rate on the account with a special coupon for new customers.
• The borrower paid a $495 appraisal fee, and the more than adequate appraisal came through within a week.
• Huntington Bank does not charge for title search, county recording fees, and “points.” Total closing costs are only $500, including the appraisal fee, on qualifying properties.
Now, that’s how to shop around for an affordable refinance mortgage.
Brian M. Bockholdt of The Huntington Bank Home Mortgage can be reached at 630-210-4205, or via email: email@example.com.
Mortgage Rates Tick Up
On November 14th, Freddie Mac’s Primary Mortgage Market Survey reported that benchmark 30-year fixed-rate mortgages averaged 3.75% nationwide, up from 3.69% a week earlier. A year ago, 30-year fixed loans averaged 4.94%.
Fifteen-year fixed-rate mortgages averaged 3.2%, up from 3.13% a week earlier. Last year at this time, 15-year fixed loans averaged 4.36%.
In the Chicago area, Mutual of Omaha Mortgage was quoting 3.75% on a 30-year fixed home loan, and 3.375% on jumbo seven-year ARMs, reported rateSeeker.com.
For more housing news, visit www.dondebat.biz. Don DeBat is co-author of “Escaping Condo Jail,” the ultimate survival guide for condominium living. Visit www.escapingcondojail.com.