When getting a mortgage, cost and inconvenience counts

Real Estate Weekly, March 17, 1999 by Ellen Bitton

In 1998, more people financed or refinanced real estate in New York City than at any other time in recent memory. Low interest rates, the availability of new residential opportunities, aggressive outreach by lenders and continued overall economic expansion all contributed to this surge in activity.

The fast-paced activity was a boon for New Yorkers: financial institutions, real estate developers, brokers and consumers all benefitted from the activity.

The number of transactions jumped dramatically from 1997, as did the average size of the mortgages. There was more than a 25 percent increase in both dollar volume of mortgages originated, as well as in units.

Where do we stand now?

The average rate on a 30-year fixed-rate mortgage is somewhere around 7.125 percent. While the current rate is favorable as compared to a year ago (when rates were 7.25 percent), it is slightly higher than just last month (when rates were 6.875 percent). In fact, for the first time in recent history, mortgage rates have increased for three months in a row.

What does this mean to borrowers who wait another six months or a year? No one knows for sure, but the more conservative players are betting against a continued drop in rates. This is true for many reasons, not the least of which is the concern expressed by Federal Reserve Chairman Alan Greenspan that a fight labor market and other variables could lead to inflation which would force the Fed to hike rates.

In either case, smart borrowers will want to be a part of the latest trends in shopping for a mortgage:

Shop On-Line

While only $4 billion of mortgages were completed on-line in 1998, it is estimated that by next year, that figure will jump to $60 billion. And in 2003, it is estimated that $250 billion - or 25 percent of all mortgages - will be completed on-line. The best reason to shop on-line is convenience. Online services also allow the borrower to tap into lenders that are outside of their local area.

Use a Mortgage Broker

The mortgage application process can be complicated, and securing the right mortgage can save significant sums of money. More and more people are catching on to the fact that mortgage brokers are an important partner to have (more than 52 percent of borrowers used brokers last year, up from approximately 25 percent the year before). Mortgage brokers serve as your advocate, have links to many financial institutions (and therefore the ability to shop around for the most favorable rate), and are able to keep an eye on the paperwork, which can be overwhelming.

Using these resources is convenient, can save money, and reduce the level of stress associated with the mortgage process. This is true no matter where the rates end up a year from now.

Ellen Bitton, President, Park Avenue Mortgage Group, Inc.