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Demand for housing remains strong as mortgage rates continue to rise, but refinancing applicants are declining rapidly.
With the average 30-year mortgage interest rate well above 5%, mortgage lenders see fewer customers wanting to refinance.
In a low-demand market, lenders and creditors need all the benefits. The refinancing process should be as easy as possible so that potential borrowers can overcome the reluctance to apply.
Lenders need digital tools and solutions that simplify every step of the loan application process, from pre-approval to closing.
Borrowers, especially digital natives, use lenders who provide the best experience, and when volumes fall, every customer counts. Digital solutions can reduce short-term risks and costs and increase long-term customer loyalty and satisfaction.
By making innovations in the mortgage ecosystem more efficient, we can learn more about how to better serve our customers, whether they are borrowers or creditors.
It also helps facilitate decision-making that improves the availability and quality of information used to make decisions.
Digital authentication for business, income, and employment can save up to 12 days in the creation process and can be achieved through simple interaction with the borrower.
Verification software allows borrowers to give creditors access to financial information. These approvals allow the borrower to extend inspections at no additional cost or hassle, allowing for more work in less time.
Given the record amount of new loans that many mortgage companies have experienced in recent years, being more flexible could mean more business.
Digital authentication is a win-win for everyone. It increases the creditor’s income and reduces his stress, making him more likely to visit or recommend friends and family again.
The reason for this is that many homeowners still want to use their equity in their homes or have high-yield mortgages that can be refinanced.
Some homeowners are opportunistic and regularly refinance to get the best interest rates, while others do not have the resources to go through the loan process frequently.
These homeowners simply want to focus on how to get the most out of their homes and capital.
But as interest rates begin to rise, homeowners who have not benefited from historically low interest rates in the past two years feel a sense of urgency. Now, these homeowners prefer to keep interest rates lower or borrow money from their homes for cheaper payments.
They want to make these loans fast before they become too expensive. To better understand current issues related to key factors and mortgage refinancing practices, Mastercard Finicity surveyed 1,075 U.S. residents with mortgages in April 2020.
The results show that there are still areas of the loan initiation and initiation process which can cause friction and stress for home buyers and refinancers, and these issues have a significant impact on homebuyers looking for credit.
Eliminate friction from refinancing your existing mortgage. Finiteness data show that two-thirds of homeowners are willing to refinance to get a lower interest rate, and 58% of respondents refinance to pay an interest rate of 1% their predominant proportion.
Low-interest rates allow homeowners to refinance their existing mortgages and save money, but the Fed has recently raised rates.
It marks the end of US refinancing growth, which has seen nearly $ 5 trillion in refinancing mortgages over the past two years.
Another factor that causes homeowners to refinance is rising house prices across the country.
According to CoreLogic, the average increase in homeowners’ wealth increased by 31.1% from Q3 2020 to Q3 2021, the largest increase in 11 years. An increase in these assets contributes to more refinancing payments, as borrowers seek to capitalize on the increase in the value of their home as a second mortgage.
In the absence of historically low-interest rates to encourage homeowners to refinance, lenders should focus on streamlining application and loan processes to allow for a digital approach.
This makes it a great experience for anyone looking to refinance or buy their first home.
After potential buyers have reached the final stages of the mortgage process and increased their confidence, many have experienced great fatigue and frustration.
Are you eligible for a mortgage? Is the property valued at the estimated price? Do you have a search? The last thing borrowers want to deal with is an old-fashioned manual process full of cumbersome documents.
In a Finicity survey, 89% of borrowers said the loan application process was as stressful or more stressful as buying a home.
Almost 64% of borrowers said they are less likely to refinance on time due to dissatisfaction with the initial loan application process.
Reducing stress in the closing process is an important step in building trust with your debtors. Finally, for many borrowers, stress is a decisive factor in choosing a creditor and other types of creditors in the future.
Reference Source: Scotsman Guide
