Rocket Mortgage's direct-to-consumer channel rolled out an option for its conventional and government loans that reduces the borrowers' monthly payment by one percentage point during the first year.
This is being marketed as the "Inflation Buster" and the difference between what the borrower is paying and what the mortgage-backed securities investor is due each month will come from a special escrow account Rocket Mortgage is fully funding.
"The Inflation Buster pairs perfectly with the Rate Drop Advantage program which covers many of the costs to refinance when interest rates fall," Rocket Mortgage CEO Bob Walters said in a press release. "Combined, these put buyers in the driver's seat with unmatched benefits."
Rocket provided an example of how Inflation Buster works, using a 30-year fixed mortgage with a $400,000 balance and a 5.75% interest rate. On its own, the borrower's monthly principal and interest payments would be $2,334.29, but with Inflation Buster, the P&I payment drops over 10% to $2,086.59. The homeowner in this case would save a total of $2,972.40 during the first year.
Though the
Rocket brought Rate Drop Advantage to market at the end of July, which waives several fees in refinancing — for appraisal, credit report pulls, processing, underwriting and several other costs for an average savings of approximately $2,000 — within three years of purchasing a home.
For loans originated by mortgage brokers in the Rocket Pro TPO channel, Inflation Buster is available but the escrow account must be funded by either the real estate agent or the seller.
Rocket is not the only lender marketing a lower initial payment option for new borrowers. Newfi's
However, unlike Inflation Buster, the borrower is responsible for the differences in payment due amounts, which are rolled back into the principal for this non-qualified mortgage.
