Fleet Bank, which has introduced a short-term mortgage product to capture a greater share of the refinance market, has its regional headquarters at 777 Main St. in Hartford.
In an effort to reach mortgage customers in the waning years of long-term mortgages who have eluded lenders during the booming refi market, a large New England bank has created a short-term, low-rate, no-fee alternative loan.
“In the consumer lending product arena at Fleet, we are always looking for new product opportunities to better meet the needs of our customers,” said Margaret Lawlor, director of consumer loan products at Fleet Bank. “Over the last couple of months, as fixed mortgage rates have continued to decline, we’ve noticed that there are some customers who haven’t been able to take advantage of the great refinance market.”
Customers who are long-term homeowners in the final years of their mortgage have not, typically, been among the many rushing to take advantage of historically low interest rates.
“These homeowners maybe only have seven or eight years left on their mortgage and have no interest in refinancing into another 15-year loan. They were probably planning on having it paid off by X date so that, even though they could have refinanced last year, they didn’t want to,” she said.
From this scenario Fleet launched its new five- to 10-year loan product to offer a short-term alternative for customers with only a few years left on long-term loans. While the product has worked will with that segment of the customer base, it has also been working well for some borrowers who already took advantage of the booming refi market.
Last week, FleetBoston Financial, which has a Connecticut regional headquarters in Hartford, unveiled its new 5-10 Year Home Equity Refinance Loan for consumers with mortgage balances of $300,000 or less -with a $50,000 minimum – who want to take advantage of the market’s current low rates and potentially shorten the term of their loans at the same time.
“Given today’s declining rates, this product provides an excellent opportunity to refinance an existing first mortgage or to consolidate other secured real estate or other outstanding debt,” said Lawlor. “For consumers who want a shorter term on their mortgage at today’s great rates, this is the right product at the right time.”
According to the bank, the new fixed-rate loan has no application fees, no closing costs and requires no private mortgage insurance.
“Someone may have 15 years left on their already-refinanced mortgage, but now with rates coming down substantially they can afford the payment of changing to a 10-year mortgage,” said Lawlor. “The monthly payment is still going to be an increase, but an extra $100 to $200 to cut five years off of their mortgage can save them considerable interest over the life of the loan.”
Lawlor stressed that there are “absolutely no application fees, no closing costs, title or attorneys fees as there typically would be if you went with a typical mortgage broker.” Fleet Bank is absorbing all of those costs that otherwise might be added to the loan.
“[Absorbing the costs] is worth it to us not only because these loans have substantial balances,” she said, noting that balances ranged between $50,000 and $300,000. “We also have had great success using refinanced home equity loans to help build customer relationships.”
Cycle ‘Crazy Point’
Lawlor said that in bringing in someone’s first mortgage to be refinanced, the bank often is able to set up a new checking account as well – in fact, the new loan product includes rate incentives for customers to do so.
“The checking account allows them to get a very good rate,” she said. “We’re interested in building customer loyalty, and meeting the needs not only for the loan but also on the deposit side. Once they get started with us it doesn’t take long to build their whole banking relationship around us.”
Available in the nine states where Boston-based Fleet has branch locations, the five- to 10-year term of this product mostly benefits customers who can choose to shorten the term of their mortgage as a result of a lower rate, thereby substantially reducing their overall mortgage costs.
It also benefits consumers who may have refinanced more recently, but who want to take advantage of the current lower rate environment without extending the term of their mortgage.
Dennis Shane, spokesman for Fleet’s Connecticut operations in Hartford, said, “This is becoming a very popular way to refinance. When you think about refinancing, and refinancing with a conventional mortgage, this looks like an attractive option because there are no fees, no application costs, no closing costs, no nothing. It’s very easy for someone to repackage their loan and get some money out of it. It’s just a great alternative for people.”
Lawlor admits that this product won’t be around forever. Once rates start to go up again, whenever that may be, the product will sunset.
“At some point when rates begin to go up again, this product will probably move out of favor. The entire notion of refinancing a first mortgage is based around these low rates,” she said. “When rates go up 100 or 200 basis points higher there just won’t be the appetite for people to refinance like there is today. We’re at a crazy point in time in the interest-rate cycle, and it’s obviously not going to last forever. But right now rates are at 50-year lows and once people get locked into one of these short-term loans they won’t have to worry about where the rates go.”
As of last week in Connecticut, Fleet was offering its 10-year loan of between $100,000 and $300,000 at a 4.74 percent interest rate. That includes the 1/4 percent discount given to customers who elect to have their payments automatically deducted from a Fleet checking account. Those who chose a loan of between $50,000 and $99,000 were paying a slightly higher rate – 4.99 percent with the checking account discount.
Rates can vary based on competition across the Fleet market footprint, and as with most banks, Fleet takes a look at local competition when setting its rates.
