Last week I ‘challenged’ friends and followers inquiring whether they would choose $1 million guaranteed, or a 75% chance at $10 million. It was a mixed bag of results, and each respondent had their philosophy and motivation as to why they would pick one over the other. The question was a great example of perspective and how something might be compelling to one person, yet not to another.
Along those lines, another fascinating analysis came out this week. According to Freddie Mac, the average mortgage rate hit a three-year low. Black Knight, a financial analytics company, estimated that 8.2 million borrowers could refinance and lower their interest rates saving approximately $270 per month with these new rates. Exciting news, indeed.
But wait; about a month ago, Black Knight reported that because of the drop in rates as of the first week of June, that 5.9 million people could potentially save money by refinancing their existing home loans and securing a lower rate. They estimated an average savings of $271 per person.
So, here is my latest perplexing question of the week … If there is now a total of 8 million viable applicants, an increase of 2 million people who can additionally benefit from refinancing their current mortgage - why didn’t those candidates who were eligible a month ago not do anything about it?! Those candidates are still “out there” and haven’t acted.
One possible answer is that those 8 million candidates are people who spoke with me, and were in touch about interest rate questions and market trends, and by-design they waited in anticipation of this further drop. That can certainly be the case because I have been advising some of my clients who were able to wait a bit more to try “to catch” a further dip. The only thing is, I know that I didn’t speak to 8 million prospects over the past month, and I know that not everyone is giving and getting the same advice as I am.
I have to believe that of the millions and millions of eligible candidates out there who have not yet refinanced, it is because they don’t realize they should, or don’t know that they could. Many people have a preconceived notion that they “it won’t pay” to refinance because they were told rates need to drop “$X” for it to be worthwhile, even though that is no longer the case. Others may wrongfully believe that they are not eligible because of appraisal values, credit issues, or income disqualification that might not be accurate.
Things have changed substantially, and no one should employ old school logic in today’s market. For most, they merely need the guidance and advice of a competent professional who they believe is genuinely their advocate to help make the determination. Find out if you are eligible and how much you can save before it’s too late. Remember, when the Federal Reserve lowers rates (as expected later this month), mortgage rates are expected to rise. The cost of waiting can be quite costly, indeed. Shout out and happy birthday to Dov Erdfarb, Miriam Lightman, and Estie Rottenstreich.
By Shmuel Shayowitz
Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker, and direct lender. Approved Funding is a mortgage company offering competitive interest rates as well as specialty niche programs on all types of Residential and Commercial properties. Shmuel has over 20 years of industry experience including licenses and certifications as certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. He can be reached via email at [email protected]