July 8th, 2016 6:16 PM by Robin Bain
for a Mortgage Can Save You Thousands!!
think that saving money on your mortgage would be a no-brainer. With potential
savings running into thousands or even tens of thousands of dollars over the
lifetime of a loan, doesn't everyone shop around for the very best deal? The
answer to that is a resounding No!
2013 survey conducted by federal regulator the Consumer Financial Protection
Bureau (CFPB) revealed that very nearly half (49 percent) of homebuyers consult
only a single lender or broker when deciding on a mortgage. And a whopping 70 percent
complete only a single mortgage application, meaning they're unable to compare
mortgage offers because ... well, you need more than one to make a comparison.
With masterly understatement, the CFPB observed, "While lenders, brokers,
and real estate agents can be informative, they also have a stake in the
means people who wouldn't dream of buying a smartphone, television or washer
without seeking out the best price in the hope of saving $50 or $100 are
throwing away maybe hundreds of times as much by not finding the lowest
Saving Money on Your Mortgage –
not as if the sums involved are small. In January 2015, CBS News gave an
example of someone needing a $350,000, 30-year fixed-rate mortgage (FRM).
Shaving a 4.25 percent rate down to a 3.75 percent one would save about $100 a
month – every month. Over the 360 months that a 30-year mortgage lasts that's
$36,000. Imagine how much better your pension would look if an additional $100
a month had been put into the pot for three decades.
yet, as the CFPB points out, a lower interest rate means you pay down more of
the "principal" (the amount you borrowed) earlier in your repayments,
even though you're paying less each month. It reckons that, on a $200,000,
30-year FRM, a half-percent (50 basis point) could see you reduce your balance
by an additional $1,400 just in the first five years of the loan. That would
mean you'd have more equity in your home sooner.
that 50 basis-point difference between the best and worst rate offered to the
same buyer isn't as exceptional as it may sound. The regulator found such
differences far from unusual.
course, how much you personally can save will depend on the size, length and
type of the mortgage you want, and on the differences between the rates you're
offered. Use the mortgage calculators http://www.bainmortgage.com/MortgageCalculators
to model the extent to which saving money on your mortgage could benefit
What the Experts Say
about every financial journalist would tell you how important it is to shop
around and compare. It doesn't take that long, and the relatively few
hours you spend doing so could give you a spectacular financial return on your
investment of time. Indeed, they may give you the highest hourly rate you'll
ever earn. And, even if by chance the first offer you receive is the best one,
and the others don't gain you any money, you'll at least have the peace of mind
that comes from knowing you've got a great deal.
it's not just journalists who say comparison shopping for a mortgage is
essential. Here is advice from some federal bodies and agencies that know all
too well about the pitfalls consumers commonly encounter:
"Shopping around for a home loan or mortgage will help you
get the best financing deal. A mortgage – whether it's a home purchase, a
refinancing, or a home equity loan – is a product, just like a car, so the
price and terms may be negotiable." – Federal Trade Commission
"Shopping takes time and energy, but not shopping around
can cost you thousands of dollars ... Neither lenders nor brokers have to find
the best loan for you – to find the best loan, you have to do the
shopping." – Federal Reserve
"Consumers spend considerable time looking at different
neighborhoods and at different homes for sale. The same should be true when
choosing among possible mortgage loans. You are literally betting the house on
the choices you are making, and it can be highly beneficial to shop
around." – Consumer Financial Protection Bureau