New York Times
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It was bad enough that home prices were jumping. Lately, however, mortgage rates have been soaring as well, breaking 8 percent last week for the first time in more than two years. |
Some lenders promise to automatically lower the rates on existing mortgages -- repeatedly, if necessary -- when prevailing rates fall. Others have surprised borrowers by cutting rates on existing mortgages made without any such promises.
Ray Rawlins was dubious when James C. Riley, the chief executive of City Line Mortgage, his lender, called one day last summer and asked whether he would like to cut his payment by hundreds of dollars a month. It could be done with no fuss in a few days, he was told.
"I said, 'yeah, right,"' recalled Rawlins, a sergeant in the San Diego County Sheriff's office. "'What's this going to cost me?"' But unlike many offers that sound too good to be true, this one brought the taker no regrets. The Rawlinses now pay about $1,550 a month, or a rate of less than 7.5 percent, instead of $1,800, or nearly 9 percent, on the $192,000 mortgage on their Rancho Bernardo,
They were also spared the usual refinancing paperwork. And the only cost -- appraisal and credit check being unnecessary -- was a few hundred dollars for title insurance and a recording fee.
"All we had to do was go down to the escrow company and sign the papers," Rawlins said.
Millions of people, of course, have refinanced homes as interest rates plunged from high double digits in the early 1980s to less than 7 percent as recently as last April. Some have benefited from automatic, cost-free reductions provided by adjustable-rate mortgages. But many people with adjustable mortgages are now finding their rates going up.
For City Line's borrowers, when rates fall by as little as half a percentage point, Riley will send e-mail or otherwise notify them that a lower rate can be theirs, so long as the mortgage payments have been on time for a year and the borrower remains employed.
Riley said he had been overwhelmed with inquiries from the trade and from area consumers about what he calls his automatic rate-reduction loan -- especially since Kenneth R. Harney, a syndicated housing columnist, said such offers "may be the mortgage of the 21st century." But its spread has been relatively slow.
One reason is that rates have been mostly on the rise this year, withering refinancing incentives for all but the most dilatory high-rate borrowers. Many of those obtaining the loans now, therefore, are home buyers rather than refinancers.
Service Savers in
"Why pay $4,000 to get a lower rate when you can wait and get that rate for free" when the market improves, asked Joe Kelly, the Service Savers division manager.
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