As long as I’ve owned a home, I’ve had a mortgage. The mortgage I generally have had is usually through whatever lender came through at the time of my home purchase, but isn’t necessarily one of my choosing – it hasn’t mattered much on the company though, because as long as the mortgage rate was what I agreed to, it didn’t matter to me. Within a year or so of buying the home and establishing the mortgage, it always seems that the initial lender “sells” off the mortgage to another institution or bank. When/if that happens, the new company assumes the same terms and my mortgage remains unchanged. Same thing when I have refinance the home – the refinance company comes in with a better rate (used to, at least) and within a short time frame, sells the mortgage off to another company. To make things even stranger, this has happened to me even with an established mortgage of several years with the same company/bank. I can’t fathom why/any benefit the banks get from doing this.
TL;DR: why do banks sell/transfer mortgages around if there is no change to your term? How does it benefit them?
In: 293
Imagine you buy a 500k house with a mortgage. The loan has interest so over the course of 30 years you’ll end up paying the bank back 600k. The bank makes 100k but it takes 30 years.
Or, the bank sells that mortgage, which is in theory worth 600k for 550k. So instead of making 100k in 30 years you make 50k in one day and then they move onto the next loan.
The larger banks will buy them up because it’s a low acquisition cost, meaning they didn’t have to do any work to acquire the loan and the time frame is fine because they are a massive bank constantly collecting loan payments from all over the place so it’s a good steady revenue stream.
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