Why Are Refinancing Rates Higher Than Mortgage Rates?
Q & A with Dottie HermanQuestion: Why are refinancing rates higher than mortgage rates?
All things being equal, re-finance and purchase rates are the same. But in a re-finance boom with interest rates at an all-time low, as we have now, two things tend to happen:
1) Refinance volume dramatically increases. Because purchase transactions have hard deadlines - closing dates, etc. - many times re-finances can affect the banks' ability to deliver the loans to meet those hard deadlines. Interest rates on a refinance slightly increase to dictate the amount of volume coming in relative to the banks' capacity in order to maintain a high level of service on the purchase transactions.
2) We see lock-jumpers. When a client applies for a re-finance it is not always guaranteed that the loan closes:
- There could be appraisal issues where the value does not come in at the target value.
- If rates drop during the process, the client may leave their lender and go with another lender who is offering a lower rate, thus leaving the original lender with lock- in fees.
- A customer can decide to cancel the transaction at anytime if he/she has a change of heart and does not deem enough benefit after applying for the refinance.
More factors can adversely affect a re-finance transaction, costing the bank thousands of dollars in upfront fees. They may charge a higher rate due to the inherent volatility. Question: Does having solar power for your home increase its value when you go to sell?Answer:
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