topic Mortgages in Community Chat

Mortgages

Kachina624 — Tue, 11 Aug 2015 00:41:06 GMT

My mortgage was recently sold to a company named Carrington Mortgage Services in Anaheim, Ca. They've started sending me notices that I can refinance my mortgage and lower my monthly payment by $300. This is appealing but I keep asking myself why would want to do this and make less money for themselves. The higher interest rate would be to their advantage, right?

Anybody have a clue about this arrangement?

Re: Mortgages

reiki604 — Tue, 11 Aug 2015 00:48:58 GMT

Without knowing all the specifics, you would probably be paying less each month for a longer period of time. The mortgage compNy or bank is always going to come out ahead. They're not looking out for you. If you need to pay less each month and don't mind paying for the house longer then see what they offer you. Add in points and closing costs and any other fees. I prefer to pay off my mortgage sooner by paying an extra payment or 2 a year. We have less than a year left.

Re: Mortgages

novamc1 — Tue, 11 Aug 2015 00:51:48 GMT

I think I can answer that for you. When your mortgage is sold to another company other than the original lender you signed up with, the new "mortgage servicer" receives only a fee for collecting your payments.

On the other hand, if the new company can sell you a new mortgage, the people doing the selling it to you-- and all the accessory personnel who complete the transaction paperwork and record the new lien at the courthouse--- all get paid new fees and commissions, plus the company STILL gets to collect a "mortgage servicing fee", just as it is doing from you now.

You can and should refinance if the difference between your old and new loan rates and payments are beneficial to your bottom line, but be aware that sharks are out everywhere trying to get people to refinance, and lately they are using the hook of fear about the possibility of rising interest rates.

Nobody in the mortgage business works for free, and the customer will pay the costs of a new loan or a refinanced loan, even if these costs are not starkly apparent and easy to understand.

Re: Mortgages

novamc1 — Tue, 11 Aug 2015 00:57:17 GMT

And here's a suggestion for you........if you are truly interested in the refinancing idea, shop around with banks, credit unions and other mortgage brokers in your area. Your current mortgage servicer might just wind up being sorry the idea was planted in your head, if they lose your business. This enhances your negotiating position, perhaps.

Re: Mortgages

patbz — Tue, 11 Aug 2015 01:00:02 GMT

Kachina, why don't you call them and get a breakdown of the costs/benefits. Wells Fargo did this offer of a free refi to a neighbor of mine several years ago and she did it and saved a bundle. Around the same time we refinanced thru Costco at almost no cost and went from 30 year 7.5% to 15 year 3% (to which we pay $200 extra principal mthly).

Re: Mortgages

jackthebear — Tue, 11 Aug 2015 01:00:12 GMT

You could probably accomplished the same by

applying the $300 to the principle each month and pay

it off quicker.

If that is your goal

Re: Mortgages

Irshgrl31201 — Tue, 11 Aug 2015 01:02:03 GMT

One reason banks offer refinancing to existing customers is because Fannie Mae and Freddie Mac don't require lenders to vouch for for the quality of new mortgages so the lenders won't be require to buy back bad loans. I read that a couple of years ago.

Re: Mortgages

MyGirlsMom — Tue, 11 Aug 2015 01:08:04 GMT

@Irshgrl31201 wrote:
One reason banks offer refinancing to existing customers is because Fannie Mae and Freddie Mac don't require lenders to vouch for for the quality of new mortgages so the lenders won't be require to buy back bad loans. I read that a couple of years ago.==

***

That would be true a few years ago when sub prime loans were big business. After 2008, a LOT of that changed.

Re: Mortgages

jackthebear — Tue, 11 Aug 2015 01:09:07 GMT

@Kachina624 wrote:
My mortgage was recently sold to a company named Carrington Mortgage Services in Anaheim, Ca. They've started sending me notices that I can refinance my mortgage and lower my monthly payment by $300. This is appealing but I keep asking myself why would want to do this and make less money for themselves. The higher interest rate would be to their advantage, right?

Anybody have a clue about this arrangement?

other thing

new company:

can't have a bunch of brokers sitting around with nothing to do, so here are a list of possible new mortgages, it is busy work so to speak

Re: Mortgages

MyShadowLove — Tue, 11 Aug 2015 01:27:10 GMT

People will usually refinance at a lower interest rate, not higher, so are you absolutely sure that your interest rate will be higher?

My husband and I refinanced our mortgage a few years ago to a15 year mortgage and at a lower interest rate...Also, as another poster mentioned, we have been adding a few hundred dollars extra to the principal each month and it has now put us in a position where we will be talking to our financial advisor about paying the balance off from one of our investment plans now!

If you have a financial advisor, I would advise consulting with him about the specifics of the refinancing plan that the bank is offering you.

Re: Mortgages

Irshgrl31201 — Tue, 11 Aug 2015 01:35:53 GMT

@MyGirlsMom wrote:
@Irshgrl31201 wrote:
One reason banks offer refinancing to existing customers is because Fannie Mae and Freddie Mac don't require lenders to vouch for for the quality of new mortgages so the lenders won't be require to buy back bad loans. I read that a couple of years ago.==

***

That would be true a few years ago when sub prime loans were big business. After 2008, a LOT of that changed.

This was from an article I read in 2014.

Re: Mortgages

novamc1 — Tue, 11 Aug 2015 01:43:30 GMT

No, that is not the reason banks offer refinances.

I could explain some of the reasons and economics behind the buying and selling of mortgages among banks and other types of mortgage iinvestors using the "discount points" that homebuyers and homeowners pay for loans and refinances, but I don't think it would be helpful in answering the OP's primary question.

Re: Mortgages

Kachina624 — Tue, 11 Aug 2015 01:47:19 GMT

So many helpful replies! I do have a financial advisor and will call him. The new interest rate would be about 2 points lower. I bet they want to finance it for 30 years, when I currently will have it paid in 14 years. I have a VA loan and the new one would be FHA. I only owe less than $100K.

Thank you all so much.

Re: Mortgages

Snowpuppy — Tue, 11 Aug 2015 04:20:07 GMT

You'll be "saving" that $300 a month by extending your mortgage back out to 30 years.

See! Easy Peasy!

Re: Mortgages

Kachina624 — Tue, 11 Aug 2015 05:24:11 GMT

My first basic question was "what's in it for them?" Now I think I know.

Re: Mortgages

Lynneuk — Tue, 11 Aug 2015 12:18:39 GMT

If the mortgage rates are significantly lower than what you are paying now then refinance down to a ten year loan. You may pay the same but be paid off in ten years instead of 14 years. Check how much the closing costs would be though to see if you will save money.

Also, call the VA and ask if you can do a stream line refi with them. Much less paperwork and closing costs.

Re: Mortgages

sgraham30 — Tue, 11 Aug 2015 12:28:17 GMT

@Kachina624 wrote:
My mortgage was recently sold to a company named Carrington Mortgage Services in Anaheim, Ca. They've started sending me notices that I can refinance my mortgage and lower my monthly payment by $300. This is appealing but I keep asking myself why would want to do this and make less money for themselves. The higher interest rate would be to their advantage, right?

Anybody have a clue about this arrangement?

My refinanced mortgage is with Carrington but I refinanced via an office they have in Schaumburg, IL. There were no fees involved, my new interest rate is 4%, (original mortgage was 5.5%) The new interest rate is saving me $240 per month. It took about a month from start to finish before I signed the paperwork. I did refinance to a 30 year mortgage but I'm sending an additional principal payment every month.

Re: Mortgages

PamfromCT — Tue, 11 Aug 2015 13:30:49 GMT

If you are interested, I would act soon. Sounds like the Feds will be hiking interest rate for the first time in a number of years (maybe 9?).

Re: Mortgages

novamc1 — Tue, 11 Aug 2015 13:57:35 GMT

Whether the Federal Reserve raises the overnight rate that banks charge each other (i.e., really short-term interest rates) has little to no bearing on mortgage interest rates, which are tied to the 10-year Treasury note rate, and they HAVE gone up (and down) on their own due to market forces in the past couple years.

All depends on worldwide demand for the safety of 10-year Treasuries, and if world turmoil continues and domestic market forces indicate, mortgage rates could either go up or down. The Federal Reserve's actions might have little to do with it.

Re: Mortgages

silkyk — Tue, 11 Aug 2015 15:12:51 GMT

IMHO (because it worked for us) is stay the course. No refinancing....just make extra payments on your existing loan to pay it off early if you can. A few years back when refinancing was the BIG thing all our friends fell for it....took money out of their homes (all their equity and more!) and bought new cars, went on cruises etc AND they added years and years and years on to their mortgages. Our home is paid off.They, on the other hand, are ready to retire but HAVE to keep working to pay the bank for all that wonderful refinancing.