The pandemic-induced economic uncertainty has resulted in a record fall of home interest rates. This has triggered loan refinance like never before. Swamped with loan refinance requests, mortgage lenders are finding it hard to ensure a seamless refinance experience to borrowers. This blog looks into the key aspects of making refinance a smooth affair.
| The fall in Interest rates during the pandemic has caused refinance volume to rise to around $2.7 trillion. |
Make Formalities Less Tedious
A Dedicated Team
During a loan refinance, a borrower is supposed to provide answers to questions concerning their finances, employment, repayment plans, etc. As this can become too time consuming, lenders must work towards making it as seamless as possible. This is possible only when they assign a dedicated team to guide every applicant through the process of procuring and verifying documents.
Offer Best Quotes
Today, borrowers have multiple borrowing options available. They acquaint themselves of these options, before going to a lender. Therefore, as a lender you need to offer them the best rates and highlight the key areas of your services at the very onset. A borrower seeking refinance appreciates straight talk and less process hassles. When you offer this upfront, they settle with you.
Confusion Around Refinancing Needs
Transparent Strategy
There are different types of refinance options available to the borrower. These options vary in term lengths, interest rates, etc. But most borrowers are don’t understand which one to choose because they don’t understand a refinance strategy. Therefore, as a lender, you need to assist borrowers map their borrowing goal to the right refinance strategy. For instance, if a refinance is sought to meet financial goals, a cash-out refinance would work. Likewise, for those seeking lower monthly payments, a long-term mortgage might be a good option.
Make Eligibility Clear
A borrower expects you to clear the air about eligibility. This means you need to be quick to analyze borrower needs and suggest the best available borrowing options based on their eligibility. For instance, if the borrower has a good financial profile, they must be made aware that they are eligible for the rate-and-term type refinance. Most lenders wouldn’t care much to enlighten their prospects on such subtle but critical eligibility determiners. The ones that do can eastablish credibility easily. .
No Clarity About Home Equity
Make Home Equity Assessment Easy
Home equity is the relationship between the amount a property is worth and the amount the borrower owes on their mortgage. Calculating this involves some math and confuses most borrowers. However, it’s important for them to know their equity percentage. The lender can make a positive impression by helping compute near to accurate estimation of the equity. While most lenders prefer borrowers with an equity of at least 20%, they may decide to refinance someone with a lower percentage but with a good credit score and a low debt-to-income ratio. They can also suggest the applicant actionable ways to boost their home equity before refinancing.
| House prices increased by 19.2% in the first half of 2021, when compared to the first half of 2020. In inflation-adjusted 2020 dollars, the value of first-lien refinance originations in this period was about $1.6 trillion, a 33% increase from the corresponding figure in the first half of 2020. |
Clear Cobwebs about Equity Credit Line
Borrowers usually lack knowledge about the amount they can borrow based on their home equity credit line. And most lenders don’t feel it necessary to inform prospects about this during the initial stages of the engagement. Depending on their creditworthiness and the amount of the applicant’s outstanding debt, they may be eligible for up to 85 percent of the appraised value of their home. It therefore falls upon the lender to intimate the borrower of any existing withdrawal conditions when they open their account, and about any such requirements after the account is opened. They must convey all information regarding the amount the borrower can spend from the credit line.
Do Away with Hidden Costs
Hidden costs that surface at later stages of the borrowing process are a big let-down for borrowers. With every home equity line of credit, the borrower pays for multiple services, including application costs, title search fees, appraisals, attorneys’ charges, etc. As these add substantially to the cost of the loan, it’s important for lenders to intimate borrowers of all possible costs before initiating the actual lending process. Another pain point is the lack of adequate digitization that borrowers expect for a smooth experience. While borrowers want a digital platform that enables them to better manage loan documents, status tracking, and service queries, not every lender offers that yet, thereby complicating borrower experience.
With the gradual subsiding of the pandemic, the mortgage refinance market is picking up pace, presenting promising opportunities to lenders. To grab their chances, lenders must have the right resources and strategy to assist clients and prospects. The quality of customer service they extend would be far more critical than ever.
Who We Are And Why We Are An Industry Authority
This article is brought to you by Expert Mortgage Assistance (EMA). We have over a decade of experience in providing mortgage refinance back-office services to some of the most reputed names in the industry. Our custom refinance service assist lenders deliver the best quality service and the care to their customers deserve.
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