Wouldn’t it be nice to choose your own rate? Well, you can. In this edition of Arizona Mortgage News, local expert Mike Goblet of United Mortgage and Financial Group discusses what banks provide you during the mortgage process and why being armed with information prior to getting a mortgage can save your thousands of dollars.
Mortgage Rates today trade in a wide range of different rates. For instance, a 30‑year right now will trade from anywhere from 3.7 percent up to 5 percent. In a 15‑year, you could have an option of going down to 2.75 or up to 4 percent. The real differences between all of those rates are some of them have a buy-down cost to get to them. Others have what are called an incentive rebate, YSP or banks will call it SRP, that is provided for choosing a higher rate.
Against those, there are some factors that weigh against what they turn out to be in terms of either their costs or their rebate, things like the loan, the value, your credit scores, how much money the bank or the broker is making. All get adjusted against those different rates. But the real key is shouldn’t you know what those rates are, and you make the choice, not the bank?
Actually, there are philosophies of financial planners that can help with that. Really what you need to know is the best use of your money. For instance, if your break‑even point, most financial planners will tell you if it’s more than three to five years, you’re better off taking more money from the banks today on that incentive rebate than you are to take the lower rate with the additional cost.
There are factors of how long are you going to be in the loan, is it a 15‑year? At United Mortgage Financial Group, we provide the lender’s a pricing sheet. This shows the lender exactly what all the rebates or costs are to the loan, so they can make the decision as to the best program. It isn’t always the lowest rate.
Transcript
Matt O’Brien: Welcome back to another segment of Arizona Mortgage News ‑‑ Insider Update with our local resident expert Mike Goblet of United Mortgage and Financial Group. Hey, Mike. How’s it going this evening?
Mike Goblet: Good, Matt. How about yourself?
Matt: Not too bad. Your topic today is interesting. I guess everyone would like to pick their own mortgage rate. You question is, “Why is it that banks don’t let people pick their own mortgage rates?” Is that like the peanuts thing where everything should be five cents?
Mike: [laughs] Everything isn’t five cents in this case, but picking your own rate, yeah, there’s really no reason why you shouldn’t be able to. The real key to that is providing you with enough information so you can choose the best rate for yourself. But it is strange.
Actually, I found it strange for years that when you go to a bank or any lender, they will give you a quote and say, “Here’s your rate. It’s 4.5 percent. And here are the costs, or there’s no cost to it.” That’s all they tell you. Shouldn’t you really be able to choose your own rate? Wouldn’t that be nice?
Matt: It sure would be nice.
Mike: Matt, actually, you can, because, even with them, there are other rates available that they’re not telling you about, that have advantages or disadvantages to them. Interesting?
Matt: That is interesting. Tell us more.
Mike: Actually, mortgage rates today trade in a wide range of different rates. For instance, a 30‑year right now will trade from anywhere from 3.7 percent up to 5 percent. In a 15‑year, you could have an option of going down to 2.75 or up to 4 percent.
The real differences between all of those rates is some of them have a buydown cost to get to them. Others have what are called an incentive rebate, YSP or banks will call it SRP, that is provided for choosing a higher rate.
Against those, there are some factors that weigh against what they turn out to be in terms of either their costs or their rebate, things like the loan, the value, your credit scores, how much money the bank or the broker is making. All get adjusted against those different rates. But the real key is shouldn’t you know what those rates are, and you make the choice, not the bank?
Matt: That would make a lot of sense, but it gets confusing when you factor in all the present value of money and long term value down the road.
Mike: That’s a real factor. Actually, there’s philosophies of financial planners that can help with that. Really what you need to know is the best use of your money. For instance, if your break‑even point, most financial planners will tell you if it’s more than three to five years, you’re better off taking more money from the banks today on that incentive rebate than you are to take the lower rate with the additional cost.
There are factors of how long are you going to be in the loan, is it a 15‑year? Candidly, my job, and what we do here at United Mortgage Financial Group, is I provide the lender’s pricing sheet. You can see exactly what all the rebates or costs are to the loan, and then make the decision as to the best program. It isn’t always the lowest rate.
Matt: That makes a lot of sense. I’ve worked with you on those and that is something that’s unique about you guys. You give us four different scenarios that give you a snapshot of today and down the road.
The question you keep asking is, “How long are you going to be in this house? What is your exit plan?” Those are good questions. Most people are probably going to look at the short term versus the long term, especially in today’s market.
Mike: You’re talking thousands of dollars in most cases, in difference of costs or rebate money, or money you can keep in your pocket. It should be your choice. Banks aren’t giving you that choice. By the way, they operate within the same framework I do. They’re just not working with you like the trusted client or like a financial planner, in my opinion, as they should be.
Matt: That makes a lot of sense. You’re 100 percent right. You’re pretty much playing the role of a financial planner at that stage. As a bank, they don’t want you to know what the best option is for you. They’re looking for the best option for the bank.
Mike: A lot of reasons they don’t do it…You bring up an interesting point. Nothing changes for me, and actually nothing changes for the bank regardless of the rate you choose. There are different factors involved.
What they don’t want to disclose to you is how much money they’re actually making on the loan, from the back side. They don’t want you to see that and they don’t want you to know how much they’re making. I know the industry average runs from 2 to 2.5 percent in terms of their cost.
Although they may disclose to you there’s no origination fee, that’s because they’re making it on the back side, but not telling you about it.
Matt: It makes a lot of sense. Those are good things to consider when picking your mortgage rate, as you say.
Mike: If you want to learn more about it, give me a call. I’m happy to walk you through the process, even give you questions to ask your bank if you’re going through the process right now. Put them on the spot. They should have the answers and there’s no reason they shouldn’t give them to you.
Matt: That makes sense. Mike, what is the best way for people to reach out to you?
Mike: Our phone number at the office is 480‑503‑3533. Call me on my cell at 480‑220‑2329, or email me at mike.goblet@umfginc.com.
Matt: Excellent. Thanks for another informative hangout with you.
Mike: My pleasure. Again, I love the questions, would love to talk with clients, even if it’s just to make them a more informed shopper. I look forward to the opportunity of helping them.
Matt: Very good. Have a great Fourth weekend, Mike.
Mike: Thank you, Matt. You too. Have a very good one.
