Why would a bank want to refinance my mortgage?
Silent Kninja asked:
A few years ago, I had a mortgage with Bank A. The rates went way down so I refinanced with Bank B at a lower rate AND a shorter term (went from 30 year to 15 year.) Why would Bank B want to offer me something like that? What is in it for them? Please advise. Thank you!
Caffeinated Content
A few years ago, I had a mortgage with Bank A. The rates went way down so I refinanced with Bank B at a lower rate AND a shorter term (went from 30 year to 15 year.) Why would Bank B want to offer me something like that? What is in it for them? Please advise. Thank you!
Caffeinated Content
September 13th, 2008 at 1:39 am
What in it for B? They got your business. They collect your payments and get to skim off some of that interest as profits.
Simple as that.
Keep in mind that lower interest rates do not mean lower profits for lenders. Whether the interest rate is 3% or 8% or 20%, they pretty much get to skim off the same dollar amount in profits.
September 15th, 2008 at 12:57 am
cause you are still paying interest maybe a little lower but they stole you away from bank A , banks earn money from Interest
September 17th, 2008 at 9:30 am
Simple - they want your money. Take a close look at the offer and do some compairson shopping. What would you stand to gain (lower payments perhaps?)? What would you stand to loose?
September 19th, 2008 at 12:34 am
They invest their clients money and pay them a lower interest rate than your mortgage interest rate is, so they make money.
They could sell your mortgage to an investor at a fixed rate which is lower than your mortgage interest rate.
It’s a numbers game and simple mathematics.
These answers are are clueless.
They don’t explain why a another bank would finance your home and give you a lower interest rate.
98% of all mortgages are sold.
Which makes about 98% of the answers given here wrong.
September 19th, 2008 at 10:12 am
Bank B is getting there money back faster with a 15 year mortgage so they are making more money off your mortgage faster. It lowers their opportunity cost by having their money back sooner. The rate should be lower but the payment will still be a bunch higher because your time period is cut in half. If you can afford to pay the payments on a 15 year mortgage do it cause you will be paying less interest throughout the span of your mortgage.
September 19th, 2008 at 11:31 pm
Well, first of all they will not only get your mortgage and hopefully a long time future customer but they will also get the fees involved with refinancing your mortgage. These fees are a great profit for the financial institution. A few of the fees that can be charged are: orgination fee, points, closing costs, ect…. All of these add up to big bucks for them
September 21st, 2008 at 3:55 am
so they can make more profit,.,.
shop around,..
moga
September 23rd, 2008 at 11:54 am
It’s all about the money. They are in the job of making money. I think I can explain it like this. They will be able to make lots of money off this new loan.
Let’s just say that you borrowed $100,000.00 that would be 180 payments for 15 years. Now let’s say that your new mortgage rate is 5% and now your new payments are $790.79.
On a $100,000 loan for 15 years the total Interest would be $42,342.20 Not a bad increase. You will have paid $142,342.20 for a $100,000.00 loan.
That’s why they do it, in order to make a profit. Plus you had to pay refinance fees, closing fees and those should be factored into the final cost.
I’ve given you a webpage so you can calculate your own mortgage payments, even your old ones. Have fun with it.