Churning a mortgage – that’s how the mortgage industry refers to a scam performed by some lenders across the country. Here’s how it works: because interest rates for home loans are at rock bottom low rates, these lenders offer borrowers a rate lower than a borrower’s current rate. However this rate is not the lowest interest rate available, but if the company can get the borrower to take this rate, the company knows that low interest rates will likely be around for many months to come.

Then, a few months after that loan was closed, the company contacts the same borrower and offers them a refinance at a lower rate than the one they gave them previously. You see, that mortgage lender should have given the borrower the lowest interest rate at the beginning, but now they can make money on two closings, all at the expense of the borrower.

This is what mortgage brokers like Indigo Mortgage Colorado call churning and it happens to borrowers don’t shop their loan around. In our experience, the biggest offenders are the big-name national lenders that advertise a lot. Don’t assume your lender, especially the big national lenders, are giving you the best interest rates available in the market. Shop your loan around to get two to three offers, and be sure to shop with a local trusted mortgage company like Indigo Mortgage. We are happy to provide our mortgage rate and closing costs without seeing other offers, letting you compare and know you’re getting the lowest rate and fees available up-front.

August 2021 Mortgage Update Buyers' Closing Costs