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Why Are Refinancing Rates Higher Than Mortgage Rates?

Why Are Refinancing Rates Higher Than Mortgage Rates?


Q & A with Dottie Herman


Question: Why are refinancing rates higher than mortgage rates?

Answer: All things being equal, re-finance and purchase rates are the same. But in a re-finance boom with interest rates at an all-time low, as we have now, two things tend to happen:

1) Refinance volume dramatically increases. Because purchase transactions have hard deadlines - closing dates, etc. - many times re-finances can affect the banks' ability to deliver the loans to meet those hard deadlines. Interest rates on a refinance slightly increase to dictate the amount of volume coming in relative to the banks' capacity in order to maintain a high level of service on the purchase transactions.

2) We see lock-jumpers. When a client applies for a re-finance it is not always guaranteed that the loan closes:

  • There could be appraisal issues where the value does not come in at the target value.
  • If rates drop during the process, the client may leave their lender and go with another lender who is offering a lower rate, thus leaving the original lender with lock- in fees.
  • A customer can decide to cancel the transaction at anytime if he/she has a change of heart and does not deem enough benefit after applying for the refinance.
More factors can adversely affect a re-finance transaction, costing the bank thousands of dollars in upfront fees. They may charge a higher rate due to the inherent volatility.
 
Question: Does having solar power for your home increase its value when you go to sell?

Answer: It's still early for the installation costs to be recognized by the market in many cases, often because many solar panel installs are actually leased and not considered part of the real estate.  Over time and certainly in specific situations, there is the potential for an upside to value.
 
Question: There is a home next to my house that is currently, I believe, bank owned. How would someone go about getting information about listing price and buying the property? I don't know how to find any information.

Answer: A call or visit to the offices of your township can provide information as to the status of the property. The address and Block and Lot information can also be helpful to research who holds the deed, and mortgage information as this information is customarily recorded.
 
Question: Is there an average amount of time it should take to sell a home? Or does it vary by city, town, type of home, etc?

Answer: The selling of a home does depend on many variables - many of which you mention, but the most important factor is pricing. Homes that are priced properly, sell faster than those that are over-priced. As most buyers begin their home search on-line, they are generally up-to-date on comparable sales and are therefore more informed and discerning.
 
Question: I put my house on the market 8 weeks ago. We have had showings and open houses, and not a single offer. My agent keeps saying the interest is good, but we are eager to sell and buy a bigger home. Should we reduce price? How do we get some constructive feedback?

Answer: Your home is on the market a sufficient amount of time, and it would probably be advisable to have a sit down with your real estate professional to discuss a price adjustment and more specifics of the feedback from prospects of features of your home that you may want to improve to overcome objections. Tweaking your home's presentation may change first impressions.

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