As I was getting ready for work Tuesday morning, The Today Show on Nbc had a segment with Barbara Corcoran, a "real estate expert", about refinancing. Being a loan officer, I watched intently, hoping Ms. Corcoran would dispense good advice about the multitude of opportunities available for refinancing. While some of her advice was accurate, she made a estimate of points in the allotted three-and-a-half little segment that were so erroneous and misleading, I had to respond.
The video can be found on the Today Show website. I suggest watching it first.
I suppose pointing out that getting any financial advice in a three-and-a-half little segment is not a good idea. Moreover, Ms. Corcoran sold her real estate enterprise in 2001 for seventy million dollars. While I respect her success, she is no longer complex in an industry that is vastly different now and her palpate was that of an real estate agent/saleswoman, not a mortgage professional. Hopefully, the segment prompts viewers to palpate a mortgage expert for more in-depth personalized advice. I know she meant well, but I have a real problem with the following tips from Ms. Corcoran:
- 80% Ltv can "typically get refinancing" While the statement is true, she seemed to imply that if your mortgage is more than 80% of the home's value (commonly referred to as Ltv or Loan-to-Value), you cannot refinance. Nothing could be supplementary from the truth. In fact, there are government sponsored/supported programs that allow homeowners to refinance up to 125% of their homes value. Being over 80% does not automatically forestall anything from refinancing.
- 720 Fico for best rates Again, the statement is mostly true, except that the best rates are for those who have a 760+ prestige score. In fact, rates may differ at 760, 740, 720, 700, 680... You get the idea. However, mortgage interest rates are thought about by a estimate of factors together with Ltv, prestige score, your state of residence, unabridged debt profile, and others.
- Ask for a term equal to that remaining on your current mortgage or "you'll get ripped off on that interest rate." You will not get "ripped off" if you get a new 30 year mortgage. In fact, a new 30 year mortgage is likely the best way to accumulate the lowest monthly payment. Getting a new mortgage equal to that of your remaining term is standard in some cases. Ask your loan officer to show you the cost differences of various terms and programs.
- Pre-payment penalties.... Don't get one and don't refinance if you have one. This one is no ifs ands or buts egregious, primarily because it can cost you a lot of savings. If you currently have a pre-payment penalty, refinancing now at a low rate may offer savings benefits that offset the penalty. If you wait for the pre-payment penalty to expire, interest rates will likely be higher. Ms. Corcoran made a good point about peak-even analysis, and a pre-payment penalty should be part of that. If anything offers you a new loan with a pre-payment penalty, Run!!! Pre-payment penalties are virtually extinct, as they were part of the sub-prime mortgage world that is no longer in existence. This piece of advice would have been helpful in 2005 but is misguided and irrelevant in 2010.
- No conclusion costs, no points. Lenders will bury the costs in the instrument. The intimation is that a no conclusion cost/no points loan is a bad thing. Not true. A customer selecting a no conclusion cost/no points loan will trade those costs for a higher interest rate. It's that simple. Once again, have a mortgage expert show you the dissimilarity in a traditional mortgage and a no conclusion cost/no points mortgage loan.
- It take 90 days to refinance. Bogus. Typically, refinances are taking 45 days. I have heard bad dream stories from clients when they use a traditional pick-and-mortar bank where loans have taken six months. Possibly it's different in Manhattan but for the rest of us, there is no excuse for more than 60 days in a worst case scenario.
- Pmi 1.75% going up in April. This is misleading and incomplete. Pmi is hidden Mortgage Insurance. The 1.75% Ms. Corcoran refers to is the Fha Mortgage assurance Premium, or Mip. Hud has proposed raising the Mip to 2.25% this year. Mip is typically financed into the loan. Fha insured mortgages do wish Monthly assurance (Mi) of either.50% or.55% but it is normally much less than Pmi. Pmi is required if you have less than 20% equity and a approved mortgage. Pmi rates vary depending on several factors and is typically paid each month as part of your monthly payment. Again, ask your loan officer to show you the cost differences.
Don't Get Mortgage advice From "Experts" on the Today Show
