Crazy is as frenzy does in the home loan arena.
Yet another refinance rush is upon us because of these crazy-low mortgage rates — 3.69 percent interest on average last month for loans financing the 1,922 home purchases handled by Realtors in the Oklahoma City area.
People who refinanced as recently as just a couple of years ago are doing it again. Refis are accounting for 60 percent of all mortgage loan volume at BOK Mortgage, said Ben Cowen, president of the division of Bank of Oklahoma.
Last month, 15-year mortgages made up 20 percent of BOK Mortgage's home loan volume, said Cowan, whose office is in Tulsa.
Refinancers “are still coming out of the woodwork, or out from under rocks,” said Steven R. Plaisance, president and chief operating officer of Arvest Mortgage Co. and Central Mortgage Co.
Yet some folks are still on the refi sidelines.
“I think some procrastinators are getting lucky that rates are staying low,” Plaisance said, “while others are not in so much of a hurry because they feel rates will stay low for a while with the government's intervention, and they may be waiting for their home's value to rise or some other element of qualifying or eligibility to improve for them.”
A 5-percent loan rate on an existing mortgage is considered “high” right now.
“There are still a good number of higher-rate loans out there,” said Plaisance, whose office is in Tulsa. “Why have they not refinanced? Lots of reasons: plans to move soon, loan is paid down to a certain point where they are into more P than I (more principal than interest). Some just do not think about it — they know their payment, it's fixed, it's in their budget, and they have not gone to the lengths to see if refinancing could save them money.”
Well, Scott Senner, a mortgage banker with First Commercial Bank in Edmond, has done the math. He provided two examples:
• A borrower has a 30-year loan at a rate of 5.25 percent with a balance of $100,000 on an original loan of $125,000.
The current payment (principal and interest) is $561 per month.
A new 30-year payment at 3.5 percent comes to $449.
A new 15-year payment at 2.875 percent comes to $684.
• A borrower has a 30-year loan at a rate of 5.25 percent with a balance of $250,000 on an original loan of $275,000.
The current payment (P&I) is $1,518 per month.
A new 30-year payment at 3.5 percent comes to $1,122.
A new 15-year payment at 2.875 percent comes to $1,711.
Senner said all the concentration on lowering monthly payments has clouded the benefits of refinancing to shorten the term of a loan to 15 years.
“A comment I am hearing a lot right now is, ‘So, a 15-year loan will only raise my payment by X amount, and I can pay my loan off that much faster?' Since my customers are almost always surprised that the 15-year payment is not that much higher than what they are currently paying, I suspect that a lot of your readers would be as well,” he wrote in an email.
Readers, now you know.