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Do Banks or Brokers Have the Best Rates?

If it is true that commission based brokers charge more, then it should also be true that banks have the lowest mortgage rates and costs if they are not commission based.  

In order to test this assumption, we surveyed the refinance rates offered by a selection of both mortgage banks and brokers. According to our survey, the difference in mortgage rates was at most, about 1/8 of a percent, with mortgage brokers often having the lowest refinance rates. Banks and credit unions may have an advantage for better home equity loan rates and fees. Our survey does not claim the final word, but it appears that banks are not giving away the store.

It turns out that banks and brokers use the same mortgage investment companies as their source of funds. Wholesale loan prices tend to be consistent among lenders, other than a potential volume discount. Some mortgage banks in effect also compete with themselves by having both a retail division, and a wholesale division that gives brokers the ability to sell the same loan programs. 

Free market competition can also prevent zealous overpricing of refinance rates. Regardless of how they are paid, if a mortgage broker cannot offer competitive rates to borrowers, they won’t be able to sustain their business. As long as borrowers continue to compare rates and loan fees, banks and brokers need to abide by market pricing, and also try to provide more efficient customer service.

Refinance Mortgage Loan Programs

How can you benefit from a refinance mortgage? There are a few different reasons to refinance, including several ways to save money, but one of the main things to consider is how long you may keep your home, because the amount of savings from refinancing a home loan can vary depending on the mortgage program and loan costs.

A good way to save money if you plan to stay in your home for a short time, is to use a zero point refinance loan, or a zero cost refinance, because if you move or refinance your mortgage later, you won’t waste money having to pay loan fees again.

Another potential money-saving refinancing option is a 3 year ARM or a 5 year ARM refinance, which provides a lower fixed rate for the first 3 years or 5 years of the home loan.

For refinancing with a higher debt ratio, or if you have lower credit scores, see FHA loans.

Short term refinance mortgage loans include a 6 month, or 1 year ARM. To attract borrowers, lenders provide adjustable loan rates that start lower than fixed refinance rates. Every 6 months or 1 year, the rate is adjusted based on the index plus the margin, subject to periodic and lifetime rate caps. The index can be based on the 1 year T-Bill, Cost of Funds, Treasury Average, or LIBOR. The margin is a fixed number set by the lender, which can range from 2.25 to 3.00.

If you want a cash out refinance mortgage, but you currently have a low interest rate, you may want to consider using a home equity loan or a second mortgage. If you are looking for lower payments, a 30 year fixed rate refinance is a good choice. If your goal is to keep your house until it is free and clear, you may want to consider a 15 year fixed refinance.

When you compare a 15 year term, the monthly payments will be higher, but the principal reduction is accelerated, so you can drastically reduce the amount of interest paid for a mortgage.

For example, the monthly payment for a $200,000 loan, for a 15 year term would be almost $500 per month more than a 30 year term, but it would also save about $128,000 in interest payments. Technically, you could achieve similar results on a 30 year refinance mortgage by sending an additional amount each month to be applied to the principal balance, if you have the discipline.

How to Compare Mortgage Quotes

Mortgage rates can change daily, sometimes even multiple times per day depending on economic factors. For accurate mortgage quotes, get all rate quotes on the same day.

For most home loans, the lender’s mortgage rate sheets have pricing based on a lock period, which are offered in increments like, 15, 30, or 60 days. 

A rate lock guarantees the mortgage rate for a specific time. Longer lock periods usually have higher mortgage rates. Compare mortgage quotes for similar lock periods.

Increasing the mortgage rate will decrease the points, while reducing the rate will increases the points. Home mortgage rates have tiered pricing that allows you to buy the rate, or the points up or down. Compare mortgage quotes with the same loan points, such as, zero points, or one point.   

Have lenders quote the mortgage loan points separate from other fees. In addition to title insurance, escrow, or appraisal, lenders have other fees like, processing, document, or underwriting, which may be negotiable. Property taxes, home insurance, and pre-paid interest are not lender fees. 

Approximate credit scores can be used for comparing mortgage quotes, but to get actual home mortgage rates, lenders need to run a credit report, but the rate is subject to change until locked. Lenders normally use the middle of 3 credit scores of the person who is the primary wage earner. 

More information to compare mortgage quotes on a refinance mortgage or FHA mortgage.

Mortgage Refinance

We make it easy to get the lowest mortgage refinance interest rate in your area.

Our loan specialists can customize a loan that is perfect for your needs. In no time at all, you can be on the way to a lower interest rate, a lower monthly payment, or switching from an adjustable rate mortgage to a fixed rate mortgage.

When Should I Refinance?

The best time to refinance is when interest rates in your area drop below the rate of your current mortgage.  With a lower interest rate, you’ll save money on your mortgage payment every month.  Be sure to read our article titled Reasons to Refinance Now.

Turn Your Adjustable Rate into a Fixed Rate

With adjustable rates on the rise you can benefit greatly from refinancing your home for a low fixed rate.  These benefits include a lower monthly mortgage payment, and the security of knowing your mortgage payment won’t increase.

Cash-Out Refinancing

Using the equity in your home, you can refinance your mortgage for a higher amount than your current principal balance and receive the extra funds as cash.  You can use this money however you would like, including, remodeling your home, paying off high-interest rate credit cards, paying off student loans, or consolidating all your debt.  How much cash out you can receive by refinancing depends largely upon the principal balance remaining on your mortgage and the amount of equity in your home.

Eliminate PMI

Private Mortgage Insurance is usually required if your downpayment on your home was less than 20 percent.  If your home equity has increased since your purchase, you may have enough equity to elimate that PMI payment by refinancing your mortgage.

Save Thousands in Interest

When you refinance your home you can decide to switch your mortgage to a shorter term, such as 10, 15, or 20 years.  Depending on how much lower the refinance rate is, you will likely pay more per month for this shorter term home loan.  However, in the long-term you are saving thousands in interest.  And because more of your monthly mortgage payment goes towards the principal, your home equity will increase much quicker.

Reasons to Refinance Now

To refinance is to pay off an existing mortgage with funds obtained from a new mortgage loan. There are numerous great reasons to refinance your mortgage, among them the following:

Lower Interest Rates: A prime time for many people to choose to refinance is when interest rates drop lower than the rate they’re currently paying. By taking out a new loan with a lower interest rate, not only do your monthly payments decrease, but so does the total amount you pay over the life of the loan, in the thousands of dollars.

Fix That Rate: If you currently have an adjustable rate mortgage, you may seriously want to consider refinancing to a fixed rate mortgage. Adjustable rate mortgages are far riskier to the borrow than fixed rate mortgages. The payments are unstable with a tendency to increase dramatically over time, making budgeting your monthly housing payments increasingly difficult.

Build Equity Faster: Buy refinancing to a loan with a shorter loan term, you pay off your loan faster and therefore build up equity in your home faster, equity that you can then use to make improvements to your home, pay for a big purchase or an emergency, or obtain additional credit. Borrowing against home equity through a refinance mortgage usually comes with a lower interest rate than other forms of credit, such as consumer loans and credit cards.

Own Your Home Free-and-Clear: It’s a phrase every homeowner covets, when they can finally be done paying off the money they borrowed to buy their home and own it outright. Refinancing is an excellent way to own your home free-and-clear sooner than you ever could have otherwise. One way to accomplish this is by reducing the loan term, or the amount of time you have to pay off the loan. A shorter loan term generally involves larger payments, but if you can afford to make them, it could be a wise and rewarding decision to refinance your current mortgage to one with a shorter loan term.

Get Cash in Hand: If you already have equity built up in your home, then you can refinance for a larger amount than you currently owe and take that additional amount out in cash. This is also known as a cash-out refinance.

Consolidate Debt: As home mortgages generally carry far lower interest rates than other forms of debt (ie.

credit cards, car loans, or student loans), many people choose to refinance their home lo

Debt Consolidation

There’s no need to struggle with the high interest rates of credit cards any longer!  Whatever your reason for falling into debt, Somerset can help get you back on your feet.  Our debt consolidation specialists can help you:

Lower Your Monthly Payment 
You’ll benefit from the ease of paying just one low monthly payment while quickly eliminating your debt.

Save Money

Somerset Investors Corp. offers some of the lowest mortgage interest rates in the industry.  Combine your high interest credit cards, personal loans, retail cards, home improvement loans, time shares, and boat loans into a single low interest debt consolidation loan.  Even if you have bad credit, Somerset’s debt consolidation specialist can get you on the right track.

Consolidate Mortgages

Take advantage of lower interest rates by consolidating all your mortgages into a single mortgage with a low interest rate.

Smile during Tax-Time

A debt consolidation loan can save you money on taxes!  Unlike credit cards, mortgage interest is usually tax deductible.  Consult a tax professional or one of our debt consolidation specialists to get the facts.

Still deciding if debt consolidation is right for you?  There’s never any fee or obligation to speak to our debt consolidation specialists.  They can work with you to determine just how a debt consolidation loan will benefit you.

Reverse Mortgage

If you’re a homeowner 62 years or older, consider the tax-free income benefits of a Reverse Mortgage.  Unlike a regular mortgage, with reverse mortgages the lender makes payments to you.  You can choose to receive the money from a reverse mortgage in fixed monthly payments, a line of credit, or in a lump sum.  More than 55% of borrowers choose the line of credit, which allows you to draw from the loan at any time.

The amount of your reverse mortgage is determined primarily by your age and appraised home value.  To find out just how much you can get, speak to one of our Reverse Mortgage Specialists today!