Mortgage and Refinancing Information Channel:
We would like to thank the local libraries, schools, and universities for recommending students to visit us when doing research on any of our information topics.
The Right Home Loan - Floating or Fixed Rate Loan
Choosing a home loan has never been tougher. Yes, with all these cheap interest rates floating around, you as a customer are faced with a happy predicament. The banker finally seems to be your friend. He calls you in the morning, day and evening. He remembers your name and offers you the best deal. He meets you and tries to convince you to take a loan to buy your dream home. And in cash if you have only a vague idea of your dream home, the banker friend might also help you decide on the property.
With all these friends to help you, it is advisable that you look at the choices objectively and arm yourself with the requisite information.
Before deciding on a lender and before a lender evaluates you, one of the first things you need to grapple with this the choice between a floating and a fixed rate of interest. Floating rates swing both ways. They could rise in the long term or may fell. The rates that the lenders announce are for new borrowers. While this is grate news for new borrowers, it leaves people who took a floating rate loan a few years ago with a sinking feeling. This is due to a basic flaw in the floating rate loan arrangement on account of the respective benchmarks of interest (read: prime lending rate or PLR) not keeping pace with the fall in interest rates all across.
As a new customer you get the best deal as offers at sub - PLR interest rates. But if you are an existing borrower, you will have to take the initiative to strike a better deal. For example, take someone who took a floating rate loan one year back for 20 years at the rate of 7% and now pays 5%. As against this, a fresh loan for the same tenure is available at 4.5% (Dec' 2004). This is only because the lender didn't cut its PLR (to which the floating interest rate is pegged) to the extent of the fall in rates.
Just imagine, if the home loan market grew by $40,000 million (fresh loans disbursed) in the last fiscal and on an average, the lenders increased their spread by, say, 100 basis due to the above, then the home loan customers stand to lose $400 million! It is a serious consumer rights issue.
Lenders benefit more than the borrowers in the above situation. The anomaly in the contract is that while both the lender and the borrower take equal interest rate risks by entering into a floating rate contract, the rewards are shared unequally by the two.
What this indicates is that the timing and reduction of the PLR applicable for home loan is not all that transparent and a customer might not know when he is suppose to expect the cut. From the analysis of the trend in movement of PLR it is clear that competition has been the main driver in reduction and the timing of reduction for the PLR. The PLR is supposed to be the rate at which a lender offers loans to prime borrowers. Due to increased competition, lenders offer rates well below PLR to new customers. However, the reference point for these loans is still the PLR. So the lenders can offer the best deals to attract new customers but when it comes to changing the rates, it depends upon the change in PLR.The banks have a system of reset dates. These are the dates when existing floating interest loans can be repriced in cash the PLR changes. But the important thing is that if a lender does not reduce its PLR, it is hard to get a reduction in the rate.
You might argue that you could transfer your loan to another lender in case the existing lender dose not reduce rates in the future while it offers lower rates to newer customer. Loan transfer is something that is best avoided. There might be a penalty on it. (The fact the new lender will finance your penalty charges also is no consolation.) So the penalty cancels out the lower interest rate that the new lender might offer you. Also, the existing lender will insist that you clear up the loan first and then only will the property documents be released. And the new lender will refuse to release the loan without the property documents! I am sure bankers fix up a date on which the documents are exchanged and loan is transferred but the loan transfer process takes time and effort. So choose the lender and the loan option sensibly.
Author: Aron Dsouza
NOTE: This article can be re-printed and/or published online or offline for free, provided the website, http://www.RefinanceMortgagesLoans.com/, is posted along with it. The article must remain intact without any alteration.
MORE RESOURCES updated Thu. November / 26 / 2020
Today's mortgage refinance rates don't budge for fourth consecutive day | November 24, 2020 - Fox Business
Today’s mortgage refinance rates keep sinking, reaching 37-day low | November 13, 2020 - Fox Business
Today's mortgage refinance rates stay at 30-day low as final votes are tallied | November 6, 2020 - Fox Business
Today's mortgage refinance rates stay at 30-day low as final votes are tallied | November 6, 2020 Fox Business
Refinancing your mortgage? Don’t make this mistake Fox Business
Today's mortgage refinance rates rise as votes continue to be tallied | November 4, 2020 - Fox Business
Today's mortgage refinance rates rise as votes continue to be tallied | November 4, 2020 Fox Business
What to do with your mortgage refinance savings Bankrate.com
The formula I used to decide on refinancing my mortgage Business Insider
Today's mortgage rates — one rate on an upswing | November 24, 2020 FOX 13 Tampa Bay
Fannie Mae, Freddie Mac Third-Quarter Earnings Rise on Mortgage Refinance Boom - The Wall Street Journal
Fannie Mae, Freddie Mac Third-Quarter Earnings Rise on Mortgage Refinance Boom The Wall Street Journal
Refinancings drove up home mortgage apps last week The Real Deal
Galvin warns Mass. homeowners of looming refinance fee Boston News, Weather, Sports | WHDH 7News
If You Can’t Qualify for a Conventional Refinance, Try These Two HARP Program Replacements - NextAdvisor
If You Can’t Qualify for a Conventional Refinance, Try These Two HARP Program Replacements NextAdvisor
The Trump administration may privatize Fannie Mae and Freddie Mac — and it could disrupt the nation’s housing-finance system - MarketWatch
The Trump administration may privatize Fannie Mae and Freddie Mac — and it could disrupt the nation’s housing-finance system MarketWatch
Bad Credit Mortgage Lenders | The 6 Best Lenders Of 2020 The Mortgage Reports
Rising Mortgage Delinquencies to Show Up in 2021 Credit Union Times
Mortgage refinance: Everything you need to know Fox Business
How to refinance your mortgage Fox Business
How to get the best mortgage refinance rates Fox Business
How much can you save by refinancing your mortgage? Fox Business
4 ways to get lower mortgage refinance rates Fox Business
How do I get the most out of my mortgage refinance? Fox Business
The best mortgage refinance lenders of November 2020 Business Insider
Today's mortgage refinance rates mixed — one key rate drops while two inch upward | October 22, 2020 - Fox Business
Today's mortgage refinance rates mixed — one key rate drops while two inch upward | October 22, 2020 Fox Business
10 things to know before refinancing your mortgage Fox Business
Today's mortgage refinance rates hold steady at unprecedented lows | October 16, 2020 - Fox Business
How often can you refinance your mortgage? Fox Business
The Loan Estimate and Closing Disclosure: Your Guide Credible News
Today's mortgage refinance rates crawl upward — two rates rise from unprecedented lows | October 21, 2020 - Fox Business
Today's mortgage refinance rates crawl upward — two rates rise from unprecedented lows | October 21, 2020 Fox Business
Is now a good time to refinance your mortgage? Fox Business
Mortgage refinancing is about to get more expensive Pittsburgh Post-Gazette
When should you refinance your mortgage? Fox Business
How to refinance your mortgage without closing costs Fox Business
A record number of borrowers can now save on a mortgage refinance, as rates set another historic low - CNBC
A record number of borrowers can now save on a mortgage refinance, as rates set another historic low CNBC
Don't let mortgage rates distract you. You should also consider this when refinancing - Fox Business
How to Refinance Your Home | Home Lending Chase News & Stories
Can I Refinance My Mortgage With Bad Credit? NextAdvisor
Refinance your home before December 1 to avoid paying a new fee Business Insider
Compare Today's Mortgage Refinance Rates: Nov 15 Credible News
How does mortgage refinancing work? Bankrate.com
How to get a low-cost mortgage refinance Bankrate.com