Many Consumers Miss Significant Mortgage Savings, Data Reveals

Mortgage SavingsA new study from the Consumer Financial Protection Bureau and the Federal Housing Finance Agency shows that consumers may not be saving as much money as they should on their mortgage.

The two agencies’ National Survey of Mortgage Borrowers polled consumers on the mortgage process, with a detailed questionnaire of about 100 questions given out. In this survey, it was revealed that existing home sales are now at pre-recession levels, though new home sales are not quite there yet, even if they did tick up noticeably since the fall of 2014. As for mortgage interest rates, the survey shows that these rates are close to their historical lows; several rate surveys do indeed show 30-year fixed mortgage rates at their lowest levels in some 20 month. Then again, that is where the interesting aspects of the survey really come in.

It must be said that mortgage rates offered to consumers may depend on several variables, including the lender’s policies and the borrower’s FICO score – an example of this was given on the CFPB/FHFA joint survey. If a borrower has a good FICO score (“credit score”) and enough to pay for a 20 percent down payment, that could mean an interest rate of less than 4 percent, at this point in the mortgage game.

However, another lender may offer a rate that is about 50 basis points higher, meaning in the neighbourhood of 4.50 percent or less. Using the given of a loan value of $200,000 and a 30-year term, or life of loan, that could mean savings of a maximum $60 per month, or $3,500 for the first five years of the home loan.

According to the survey authors, this all redounds to a “significant” difference in savings. Sixty dollars saved per month could mean a lot of money for consumers in the lower strata, or those who are currently on a budget. That sixty dollars can be used toward other monthly expenses.

That makes it important for borrowers to always shop for the best deal available – it is not by any means rocket science, or an exact science, unlike the much simpler world of cellular service plans. The CFPB/FHFA survey does show that close to half of consumers polled do not do any mortgage shopping prior to applying.

It may seem like a “no-brainer” for consumers to shop before committing, but the survey does take note of several influences that could cause a consumer to forego the all-important shopping process. For one, there is the reputation of the financial institution or broker the consumer is dealing with. Consumers also have to weigh factors like geographical proximity and other measurables.

Those who did not take variables such as the office’s proximity, reputation, and relationship into account, said the survey, had a better chance of shopping around, as opposed to those who pay attention to all of them. This is very interesting, if a bit strange – it does suggest that Americans generally are more concerned about the reputation of the institution or broker they are dealing with than anything else when applying for a mortgage.