Author: Steve Davis

Refinancing Simplified

Do you have a home mortgage? The prospect of refinancing a home loan is intimidating to many people if they have never done it before. Not to worry. This article will discuss the most important steps to take if you want to refinance your loan, so that it becomes a stress-free process!

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In the last few years, the Consumer Finance Protection Bureau has implemented dramatic changes to the regulatory framework that governs mortgage lending. The goal was to prevent another financial disaster that was partly due to unscrupulous lending by rogue lenders that were taking advantage of consumers obtaining a mortgage loan.

Part of the new regulations are new disclosure documents and rules that are supposed to help consumers shop for loans and compare rates, fees, and costs associated with the process. In many ways these regulations have been very confusing to both consumers and lenders, so EXPECT to confront many questions and paperwork associated with this part of the process.

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Otherwise, the decision is straight forward – can you save money by refinancing? With today’s low rates, it is very likely that you can. Compare the savings in lower payments with the costs it takes to refinance. Generally, if you are going to remain in your home for at least the next year or so, you should be able to recoup the cost of refinancing in that time frame, and then save substantial money for each year afterwards. In many cases, you can structure a new loan with lower costs and start saving right away. You can use a mortgage calculator, such as the one available here to calculate your new payment when refinancing.

 
When you’ve determined that refinancing would be a smart financial decision, you’ll need to find a quality lender. The team at Riverside Bank and Mortgage makes the process easy and affordable while offering the absolute best rates available. With interest rates at record lows, giving us a call might mean big savings for you. As a small bank specializing in mortgage lending, we can provide much more personal and attentive service than the mega-banks.

Think Big, Bank Small!

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Why Are The Current Interest Rates So Low?

Looking at bank account interest rates today, you might be surprised that interest rates are currently very low. Why is this? This article will discuss—in a relatively simple way—some of the reasons why interest rates are currently so low in our economy.

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To gain and keep customers, banks must offer some level of return on savings accounts. Generally, banks have the ability to offer whatever level interest rate they want. Some banks may offer special higher interest at any given time to attract customers.

 
Banks must be able to lend money to customers. To be able to do this, they must have deposits and capital to cover the amounts lent. Banks then make profit from the interest they charge on those loans over and above their interest cost for the deposit accounts. So, the amount of interest that a bank can offer to customers on their savings accounts reflects the interest amount the bank charges customers that take out loans (mortgages, for example).

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Outside of the bank itself, there are larger economic factors that affect current interest rates. Banks receive loans from the Federal Government through the Federal Reserve, and the Federal Reserve has the ability to set the interest for those loans. The Federal Reserve also sets the interest rates for the loaning of money between banks. When the economic growth slows, the Federal Reserve encourages lending between banks and borrowing from the government by lowering these two interest rates. When it’s easier for banks to borrow money from each other and the Federal Government, banks are able to offer lower interest rates on business loans and mortgages. By doing this, the Fed stimulates the economy, and positive growth returns! When the economy is booming, the Fed may raise the interest rates to slow down the economy to prevent inflation from growing too fast.

Since the Great Recession of 2008, the Federal Reserve has cut interest rates for lending to almost zero, making it easier for businesses to borrow to get off the ground and gain profit. Consequently the rates paid by bank for deposit accounts for their customers are also much lower. The low interest rates are reflected in the lower rates banks are able to offer for business loans and individual mortgages.