Junk Mail: How do you decipher?
For nearly anyone who owns a home, it’s practically impossible to avoid a flood of junk mail related to refinancing your home. As mortgage lenders are desperate for a bigger piece of the home loan pie, they try to dream up the best ways to generate leads and a lot of their efforts end up as wasted trees delivered to your mailbox.
Part of the overall strategy of many companies offering mortgage refinancing is to reach out to a wider class of homeowners, whether these individuals need their services or not. Almost from the day that you sign your settlement papers, you can expect a host of marketers sending you letters about “new low rates” and “dropping your monthly payment.”
Trust me… I have been in this business over 20 years and the letters are so good even my own mother has called on a few of them. Be careful!!
Are Mail Offers for Mortgage Refinance a Scam?
We suggest you wait a while after buying your home and restrict your refinancing to drop in payment that make sense versus the fees that you can expect from refinancing. There are exceptions of course, if you are doing a streamline refinance after Down Payment Assistance, or there is a true exit strategy in place.
The majority of mailers you get don’t take these factors into account, which has led many consumer advocates to view most of them as scams. Too often, the writers of direct mail pieces are simply trying to get up-front fees, and some of them may never even provide refinancing services at all.
That doesn’t mean that there aren’t legitimate refinancing offers out there, just that it’s critical to read the fine print of any offers you receive. High pressure to refinance sooner than a year after purchase, or at a rate difference of less than 1/2%, is usually a sign of predatory lending.
How to Tell Which Refinance Offers are Legit
The best litmus test for whether or not a direct mail offer is a scam is an analysis of what you’re really going to get out of it–the most fundamental way to judge an offer for a refinance is by calculating how much you will save versus how much you will pay.
We recommend looking critically at loan fees that often come in the form of unnecessary loan origination fees. We will provide every family a Total Cost Analysis to make sure it is in their best interest to refinance and go over all the pros and cons.
That’s why finance pros advise you only use a mortgage lender you can trust, and never agree to an interest rate or any other aspect of a deal unless it’s in writing. Even a lending estimate mandated by HUD is not always an accurate indicator, so it’s important to look at the hard numbers when you are considering signing on the dotted line for refinancing.
Mortgage Scam Red Flags
The fact is that many direct mail pieces are just pathways to possibly predatory mortgage lending schemes that you don’t want or need, and that could harm you in the long run if you don’t fully understand what the letters are selling.
Want a Total Cost Analysis to see if a Refi is right for you?
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Mortgage Advisor, CMPS