Dishonest Mortgage Lending

I just saw a television commercial by national mortgage lender Quicken Loans. I hated it. They basically had two things to say.

First: You need to refinance right now!

Oh gee whiz. Is that what mortgage companies want? They want you to refinance right now?

I would have never guessed.

They also claim that they are extremely honest.

Okay, so far so good. Honesty is a good thing when you are dealing with a mortgage company.

Then these "honest" lenders tell the consumer that if they were to refinance now at 5%, instead of waiting and refinancing at 6%, the consumber would save $125 per month on a $200,000 mortgage.

That's true enough.

But it's not very honest, is it?

Who is to say that rates will be at 6% at some random point in the immediate future?

They don't know that. 

By waiting, you could get also get 4% (in theory), instead of the 5% they are offering now. Then your payment would go down $250 rather than $125.

I have never used a pitch like that. Then again, I don't "pitch" my Arizona mortgage clients anyway. I prefer to treat them like thinking adults.

I tell my clients the same thing every time I am asked about the future of Arizona mortgage rates:

"I would suggest that you refinance now, because rates are good enough now that it makes good financial sense for you to refinance. You are currently at 6.25% and I can put you at 5%." (for example)

Inevitably, the client asks me about the possibility of rates dropping in the future. (Maybe they've seen the Quicken Loans commercial and it put a scare in them.)

I always answer that question the same way, 100% honestly:

"I really have no idea where rates will be in a month. Nobody can answer this question for you, not even Quicken. Rates could drop significantly or they could rise significantly in the immediate future. Why not take the sure thing now, and if rates drop for whatever reason, we can look at a no closing-cost refinance in the future?"

The thing is: If you can save money on a refinance, why not just refinance? Not because you should be scared that mortgage rates could be going up, but just because it makes good sense at the current rates and based on your current rate.

Why try to scare people into taking a loan?  Talk to them as they are your peers and don't try tricky fear tactics like Quicken.  It's totally unnecessary and, in my opinion, easier to make the sale when you don't insult people's intellgence.