fbpx
  • Tel: (651) 552-3681
    Email: joe@joemetzler.com

  • Understanding how interest rates and closing costs go hand in hand.

    Read this FIRST!
    (No matter WHO you use, print this page for future reference)  #1 Mortgage Interest Rate Shopping Tip

    How Do YOU Get The BEST Mortgage Interest Rate?

    It is never about the best rate. It is about the best MATH. There is NO other answer than that.

    So why isn't the lowest interest rate the best deal? First, lower rates come with more points, fees, and closing costs. That is not the real issue, however. There is a break even point to contend with when paying closing costs, points and fees, plus tax deductions to figure out.

    In the case of a purchase loan, points are tax deductible in the year that you pay them. That is good, but then again, so is the interest you think you are saving. With refinances, the points are usually only deductible only over the full term of the loan. That could be 30 years, making the benefits and the break even point years down the road.

    Interest Rates versus Closing Costs?

    Few people understand interest rate and closing costs go hand-in-hand.  You can get a great low mortgage interest rate, but to do so will costs you more in closing costs. You can get reduced, low, or even no closing cost loans. But to do so means you get a higher interest rate. Have you calculated the math on the different interest rate versus closing cost options?  We can help.

    You constantly hear all sorts of mortgage companies talking about no lender fee, no closing cost, or even no loan origination fees if you use them. But did you know this is achieved by RAISING the interest rate you get?

    Generally speaking, on a standard 30-year fixed loan a no origination fee option will INCREASE the loans interest rate by 0.25%

    Lower closing costs = higher interest rate

    Lower interest rates = Higher closing costs

  • So why do lenders advertise really low rates with all of those points and fees?

    Because they know most consumers look at the interest rate only, and not the math.  That advertising strategy works really well. 

    How about the lowest APR

    Generally, the lower the actual interest, or the more discount points you pay, the lower the APR.  A low APR sounds and looks good.  But was it the best math?  Do you have the money to buy a lower rate? Most people don't.  Another question is how long are you going to be in the home?  I commonly see people paying additional discount points and closing cost to get a slightly lower interest rate - but if you do the math, it might take as much as 15-years to save by interest rate monthly what you spend in up-front closing costs.  That sounds like bad math to me.

    We take apart each interest rate and closing cost quote to find out what the best MATH for your situation. Everyone is different, with different wants, needs, goal, and cash flow. It only takes a few minutes for our professionals to do this FREE Service for you using special software we have. We work it up, and sent it to you (Its called a Total Cost Analysis). After that, it's your decision, and its as easy as 1, 2, 3.

    What Causes Mortgage Rates To Change?

    Did you know that one or more rate changes per day is normal?  Actually, it is unusual not to have a least one rate change in a day.  Most people do not know that.  Rate quotes can change when you call back later that same day.  In our business, a rate change also includes a change in the point cost for the same rate.  In other words, a rate can be no points in the morning, then later that day cost 1/4 point.  That is a rate change. 

    Did you also know that mortgage rates are not directly affected by what the Fed does?  Many times a fed rate cut can cause mortgage rates to go up.  Mortgage rates change primarily based on: 

    1. the perception of inflation
    2. times of uncertainty and
    3. the movement of money in and out of the stock market

    When a piece of economic data shows weakness or uncertainty in the economy, rates tend to fall.  The opposite is also true.  A drop in the unemployment rate, a rise is durable goods orders, a rise in the consumer confidence index--rates go up.  Influencing factors can present themselves at any time, affecting mortgage rates instantly.  There is no "delay".  It doesn't take time to "filter down".  Reading the paper for quotes doesn't work because the information is very old by the time it gets in front of your face.  Radio, TV and billboards are not the answer because the details are always missing.  Competitive lenders, us included, can deliver nearly identical rates to each other at anytime.   Most borrowers don't ask the right questions and focus only on the rate.  Think MATH and as it pertains to you.  That's all that matters.  

    Is a Bank Better than other Mortgage Companies or Mortgage Brokers?

    Usually they are more expensive.  All lenders get their money from the same bond market on the same day at the same time.  All lenders closing costs are virtually the same.  How they quote you, and how you pay them is the only real difference.

    Profit margin is where it is really at when comparing lenders. The bigger they are, the more they advertise, the faster you should run away.

    You see, if my wholesale cost of the loan is the same as everyone else, but I don't have all the overhead of bank branches on every corner, and I don't have the overhead of all the advertising they do - I can offer better deals.  It is no more complicated than that. 

    The Bottom Line    

    As a direct lender (part of Lenders One, the Nations 3rd Largest Retail Loan Originators), we are really like a broker on steroids. Many of our relationships often produce significantly better deals for the consumer. The bottom line is that there is no one source that is the cheapest.  If one lender was always the cheapest, eventually, everyone would know about it, right?  The only other way most lenders can compete with one another is to somehow convince the public that they have some "secret way" of providing lower than market rates.  The market is the market and you pay for it one way or another.

    Only work with a professional mortgage company where the loan officers are skilled at the mathematics and can explain it in plain English.  Don't feel pressured, and stop looking at just rate, or just cost!  Don't gamble with something as important as your mortgage.  LET US "DO THE MATH" by giving you our Total Cost Analysis report.   

    Let us show you how you can free up a LOT of money for investments... We provide visual calculations that show how "paying off" the home, versus "financing" the home isn't always a great idea.

    Find a Professional
    If you are working with a true dedicated professional who has your best interests in mind, you really don't need to worry about what they are quoting you. If will be fair and competitive. So how do you know if your working with a professional? 

    MY NUMBER 1 TIP: Google the Loan Officer you are thinking of working with! Do you get any hits? What are they? Does the Loan Officer appear to be highly respected and quoted with lots of links? Then you are probably working with a professional. Can't find anything, or maybe just a listing on the company web site? That probably wouldn't be who I would pick to handle my largest financial transaction.

    Click here for quick questions to ask your loan officer.