What What Do You Know… Fixed Rate Mortgages Are Back In Style!

I ran accross this article over at Tampa Bay Online about how homeowners are refinancing and going with fixed-rate mortgages. I thought this part of the article was interesting (emphasis mine):

For some, ARMs continue to make sense, Powers said. “Some borrowers want the ability to manage that cash flow the way that an ARM can allow,” Powers said.

“They want to be able to control that and eliminate as much volatility as possible,” he said. “When they get this payment-change notice that says their payment’s going to go up hundreds of dollars a month, that’s usually the wake-up call to say, ‘Look, talk to me about options.’ That’s why we’re seeing our business experience a benefit from borrowers who are getting into a payment that they know is secure and provides some known quantity down the road.”

That’s nice that the mortgage broker get paid TWICE for doing something they should have done right in the first place. Think about it. Every time the borrower refinances, the mortgage broker makes a nice fee.

I have to wonder how good a job these mortgage brokers did explaining the options to borrowers the first time around.

5 thoughts on “What What Do You Know… Fixed Rate Mortgages Are Back In Style!”

  1. I would always consider a fixed rate mortgage if the rate is good. I understand that the interest rate can go down and I could save money but banking on a fixed rate mortgage you can lock yourself in for a few years and protect yourself from market variances.

  2. You really think that people in general will make the sound decision the first time around?

    Sure, the brokers bear some responsibility, but they don’t make their clients’ decisions for them. For most people it’s very easy to figure, “Hey, I’ll probably be moving in five years anyway, I might as well save on payments now.” Or maybe they just take a gamble hoping to win out over a fixed rate. That in two years they’ll have a better debt-to-income ratio and a better credit score. Etc.

    And in terms of doing things right the first time around, a mortgage broker’s responsibility is to secure a loan for their client that the client agrees to. Like a lot of other things dealing with money, the most attractive option isn’t usually the best one. (Though I would be remiss if I didn’t point out that for a lot of people, an ARM does exactly what they want.)

Comments are closed.