Mail and Email Direct Refinance Solicitations… Be Very Careful
I had a client reach out to me about a mailer he got touting how he could get a refund on his FHA mortgage insurance and refinance his 6.75% 30-year fixed-rate mortgage down to 4.99%. This mailer was not from his current mortgage servicer or his mortgage originator, but the letter made it look like it came from the company that closed his loan. He thought it was from me (his lender when he bought) but called to get details, and this is where I told him it did not come from us or who he is making his payments to now and to beware of these mailers and or direct email solicitations as they are not always what they seem to be. Which, in this case, was not as good as it seemed. In his case, the “refund” they referred to was accurate, but not as to how it would be applied. It would have only been credited against his new Upfront Mortgage Premium and not cash to him. So, what about the 4.99% mortgage rate? Considering that mortgage rates, even FHA, which is now below the 6.5% mark, are nowhere near 4.99%, there would be a cost of roughly $9,000 to him to buy down the current rate to around 4.99%. His closing cost and escrows would have been another $10,500 for a total of nearly $19,500, which, of course, they told him he could finance into his new loan amount so he would not be out of pocket. The new rate and new loan amount would have saved him close to $250 per month, which sounds pretty good… right? The answer is probably not, as he would have lost about $19,500 in equity by financing the cost into his loan which would take about 6.5 years before he began breaking even on it. I tell my clients that if they cannot break even on their cost over a 12–24-month time frame, they probably should not do it on a standard rate and term refinance. Don’t get me wrong, $250 per sounds good for a loan in the mid $300K range, but over 6 years to break even?
The mortgage industry has truly taken it on the nose the past couple of years, and there are plenty of direct mail marketers who are out there pitching all kinds of ways to “save you money.” We all want to save money but at what cost? Not to mention that you have no relationship with these direct mail folks who have bought your information online so that they can solicit you for a new mortgage and or other products that you probably don’t need. They are very good at their market approaches, but you should really go to the person who did your loan the last time (assuming you had a good experience) or a recommendation from a friend or realtor who has done business with this person. Bottomline… you would not take advice from an online/direct mail solicitation about your and or your family member’s health. Why would you trust an email or direct mail solicitation regarding your largest investment… in most cases your home?
Remember… the BEST RATE… IS A LOCKED RATE… with a float down… ask me about our program that allows you to lock your rate and then float down if rates move lower.
Make sure you (or your buyer) get pre-approved before looking at homes so we can determine if you are looking in the correct price range and have you armed to submit an offer with a pre-approval letter!
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Blog post date: Thursday, March 13, 2025
