Why would a bank offer refinancing at a lower interest? Is any money saved at all, or is it just paid on a different timeline?
In: 265
TLDR: banks offer refinancing even if they’ll make less money because they’d rather you get a better rate and keep paying interest with them than leave for a different lender.
One reason for refinancing is changed borrower circumstances. When I bought my first condo 20 years ago I had a spotty credit history, and didn’t qualify for the best rate. My lender helped me to select a variable rate mortgage with a better initial rate with plans to refinance to a fixed rate before 3 years once I had a clean payment history. In 2 years I qualified for a 15 year fixed rate that was slightly lower than my original 30 year variable rate, and was able to lock in that rate for the life of my loan.
Variable rate mortgages are commonly lower rates than fixed rates, because you as the borrower are assuming some of the risk that rates will rise in the future. It can be worth the trade off if you don’t plan on keeping the property long term or you think you’ll qualify for better financing terms in the future
Latest Answers