When interest rates drop, predatory lenders come out in full force. If you know anyone considering a refinance, anyone who purchased in the last two years or had accumulated debt, or if you are personally looking into – you’ll want to pay attention today. I’m going to share the red flags you need to watch out for to avoid getting screwed.
Here’s why I’m issuing such a bold warning. At the end of 2023, we had recently received some positive inflation news and the people went wild speculating that the Federal Reserve would cut rates at least 4 times in 2024. Of course mortgage companies also got wind of this and started ramping up to capitalize on a “refi boom.” There are call centers that will pop up with inexperienced loan officers just for 18 months to capture refinances and then disappear. So all these folks staffed up on loan officers, processors, underwriters.
Then, as we know, inflation ticked back up and those four rate cuts have yet to materialize. So these refi order takers have been growing more and more impatient, hungry, desperate even. Now that rates finally dipped, we are already seeing them blow up innocent new homeowners who don’t fully understand how a refinance works but have been banking on one since they purchased. That’s a dangerous situation and I want to help you, your friends, your clients – avoid it.
Who has a target on their back?
Here are the people most likely to be targeted, which by the way could also mean they stand to benefit from a refinance when it’s timed and done correctly. More on that in a second. New homeowner’s have a huge target on them because anyone who purchased with a rate above 7% will be easy to impress with a rate in the low sixes or high fives, even if it has points attached. As we’ve discussed here, a lot of homeowner’s have accumulated debt over the past few years and a debt consolidation refinance might make sense. Home equity can also be tapped into for investment purposes through a refinance.
Refi Red Flags
I’ve been through three refinance cycles in my career and when I go to explain a refinance to a homeowner, transparency is key. The information needs to be presented in a way that’s clear so they can see not just what their monthly savings will be, but what their true net savings over the long run look like. When refinancing you want to pay attention to:
The costs attached to the refinance.
Whether or not you are paying points for that rate.
What your new loan amount will be.
When your breakeven point will be on costs incurred versus money saved monthly.
Here’s the problem though. In order for my clients to understand these numbers, I have to spend some time spent educating them first. That’s what I want to do you for you and anyone you know who might consider a refinance in the coming months. Give you all the knowledge you need in order to know if you are making the right decision on a potential refinance.
So I’m going to host a free webinar, open to everyone – everyone except for the sleazy sales guys I mentioned in this post – on Thursday, August 15th at 11am Pacific. I will show you guys a total cost analysis, I’ll show you to make sure your loan estimate matches what you were originally sold, I’ll provide the visuals so you can see exactly where red flags pop up. I’ll also teach you how to analyze your new loan amount and what to do with your current escrow balance.
You don’t have to take the time to educate yourself before you refinance, but not every loan officer who is calling you, pushing you to refinance, has your best interests at heart. So I’d recommend taking the 30 minutes to get confident on this stuff. I hope I’ll see you there next week and that you share this with anyone who could benefit!
Register here. It’s totally free and there will be zero sales, just education.
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