Mortgage interest rates are expected to drop here in the next couple months. That’s great news, especially for many homeowners who took out mortgages in the last few years who have sky-high interest rates and who will want to refinance.

Understanding Mortgage Churning

But remember, all lenders make their money off originating mortgage loans and then selling them off, so the more loans they originate, the more money they make. So if a lender can get the same borrower to refinance numerous times, then they keep making money off that borrower. Churning happens when these unscrupulous lenders charge a higher interest rate than what the market dictates.

Why Refinancing Can Be a Trap

These lenders charge that comparatively high interest rate, knowing that in 6 months, they will contact the borrower to offer a refinance into a lower rate– one that they should have charged in the first place! But it’s their opportunity to refinance that borrower again.

How to Protect Yourself from Churning

This is known as churning in the mortgage industry and the big-name lenders are the biggest culprits like that “Pocket” sounding lender and that “Veterans Divided” lender. This is why it’s important to shop your mortgage around so you can get the best rate available and not be a victim of churning.

Indigo Mortgage: Your Trusted Local Lender

So, when it’s time to refinance, shop your mortgage and be sure to include your trusted local mortgage company, Indigo Mortgage. We’ve served New Mexico’s home buyers since 2003!