Competition for Mortgages Heats Up

Now that Bank Of America has really upped the ante with a "no fees" mortgage loan, how is the competition going to react? With a lot of creativity, according to an article on CNN Money.

Washington Mutual has now launched a mortgage that allows the borrower to switch back and forth from a fixed rate to an ARM, without refinancing! In addition, the borrower will pay little or no fees for this service. In my opinion, this is a truly creative way to get people's attention, and get lenders out of the business of charging fees, and back into the business of lending.

But it's not just the "big boys" who are coming up with new and better ways to lend to you; your local credit union may have some tricks up its sleeve as well. Some credit unions are now offering a home loan payment relief or HLPR loan. This loan is a lot like an ARM, but without many of the disadvantages. It still carries a lower initial rate -- usually 1% below the current prime rate when the loan is negotiated. However, it will adjust -- but only to the level of the national rate average at the time of the initial loan! Therefore, while the rate will go up, the borrower knows exactly how much. In effect, the loan is capped based on the current rates.

This is a great deal for borrowers -- a good rate today, and a guarantee of what the rate will be later.

The HLPR loan is only open to those in the lower to middle income brackets. It truly is designed to give some "home loan payment relief" to folks who could be struggling with payments now. This is really good news for borrowers who need to get out of crippling financial situations, including paying subprime when they shouldn't be.

Expect to see more competitive offerings, as fewer people borrow and more lenders come under fire.

Michael Chantrel 

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