LendingTree Review: Lower Lending Rates For All

22 years ago, LendingTree revolutionized the way consumers get a mortgage. In the past, consumers had to pitch banks to get a mortgage or refinance their loan. Here is a through LendingTree review after working with them for over six years and visiting their headquarters in San Mateo, CA.

Today, thanks to LendingTree's innovation, banks now pitch you to win their business. After all, “when banks compete, you win.” Here's a comprehensive LendingTree review. I've been working with them for 10 years now.

LendingTree Review: The Founding Of LendingTree In 1996

After graduating from Bucknell University, Doug Lebda went to work for PricewaterhouseCoopers in Pittsburgh as an auditor and consultant. When he decided to purchase his first home and obtain a mortgage, he found the process of visiting multiple banks and combing through mortgage offers frustrating, time consuming, and exhausting.

Lebda realized that if the process was that difficult for someone with his financial acumen, then there must be a massive market of others with the same desire for a better way. With this idea, Doug founded CreditSource USA in 1996 with Jamey Bennett, whom he knew from Bucknell and had previous experience founding BookWire.

The new company was later rebranded as LendingTree and by 1998, LendingTree launched nationally online with its headquarters based in Charlotte, NC. They also have a large office in Burlingame, just 30 minutes south of San Francisco.

On February 15, 2000, LendingTree went through a successful IPO and is now a ~$3 billion market capitalization company as of 2020. LendingTree has the balance sheet, longevity, and trust to be one of the leading lending networks on the web today.

Free Quotes, No Obligation

The great thing about LendingTree is that you can apply for a no obligation loan online in minutes, and within the hour, you'll get competing banks e-mailing and calling you about their best rates.

You, the borrower doesn't pay LendingTree a penny. It's the banks who pay LendingTree to compete for your business. As a result, lenders are motivated to try and get you the best loan possible to win your business.

Be forewarned the celerity of the lenders can be quite surprising to those who are not used to such quick service. Their e-mails and phone calls will die down after several days once they realize you have gone with another lender, or are not interested in their offers.

I like to use LendingTree to get quotes in writing and then bring these quotes to my main bank to get them to match or beat the LendingTree rate. Using this strategy, I was able to get my bank to refinance my jumbo loan to a 2.375% interest rate from their initial 2.5% offer.

Why You Should Refinance Now

Mortgage rates are still near all-time lows in the pandemic. You should refinance now if you haven't for at least one year.

It behooves you to at least check what the latest rates are if you have not refinanced in the past six months. If you are a new homebuyer or want to refinance, it's important to get as many bids as possible to get the best mortgage rate and terms as possible. Mortgage rates are at all-time lows in 2020.

A big part about growing your net worth is doing everything possible to minimize expenses. I believe everybody should at least own their primary residence to get neutral the ever rising property market. Once you own, it's all about lowering your property taxes and getting the best mortgage rate possible.

My Take On Interest Rates

Mortgage rates have been going down for over 35+ years as you can tell by the chart. There is obviously a risk that interest rates will rise at some point in the future, but I'm in the camp that interest rates will stay low for years to come.

Just look at Japan after their real estate bubble burst in the late 1980s. Their interest rates have hovered close to zero for 30 years. Sweden, Australia, and 20+ other countries have zero or negative real interest rates at the moment as well. 

30 Year Fixed Mortgage Historical Rate - LendingTree Review

I see a scenario where interest rates only inch up by about 2% maximum over the next 20 years because there's still a lot of slack in the economy. There's a large underemployed population and median household income has gone from $59,000 in 2005 to now only $68,000 in 2021.

As inflation picks up, I expect household income to grow further. The national minimum wage of $15 has received tremendous support. Inflation will help propel the housing market to new highs.

The Federal Reserve will only raise the Fed Funds rate marginally. Even so, that doesn't mean mortgage rates will go up because mortgage rates are more tied to the 10-year bond yield which has been declining due to all the risk in the markets.

In a continued low interest rate environment, I prefer taking out a 5/1 ARM amortizing over 30 years. Why pay a higher rate when the average length of homeownership is 7 years and interest rates are in a structural decline?

You can certainly go for a 30-year fixed loan if you want absolute peace of mind and believe interest rates will be aggressively higher in the future. But if the 5/1 ARM mortgage rate is at least 1% cheaper, then I would strongly consider an ARM.

Take the monthly interest savings and save or invest it. There's a interest rate hike cap that's fixed for one year after the fixed adjustment of an ARM is done. There's also a lifetime interest rate cap that's usually no more than 4% – 5% higher than the initial rate. You can always refinance your ARM before the fixed period is over like I've done many times before.

Related: Lower Mortgage Rates With Lower Fees

If You Currently Have An ARM

If you have less than one years remaining on your adjustable rate mortgage before it becomes variable, I highly recommend you refinance today or before the fixed rate ends because ARMs are tied to LIBOR rates once they are variable, and LIBOR rates have surged higher.

The London Interbank Offered Rate (LIBOR) is a short-term rate tied very closely with Fed Funds rate, which is the overnight interbank lending rate in the US. Although the Fed is aggressively cutting rates in 2020 to combat a coronavirus-induced recession, LIBOR is still high.

The great thing when you refinance an ARM is that banks based the initial 3, 5, 7, or 10 year fixed rate based on the 10-year bond yield, which has remained relatively stable. The banks are essentially SUBSIDIZING you with a lower rate in the beginning to get your business.

An ARM is a better choice over a fixed rate mortgage in my opinion. The average homeownership is only about nine years. There's no point paying a higher mortgage rate for a 15-year or 30-year fixed if you don't plan to own the home for that long.

Take Advantage Of Lower Rates

The goal is to save money by locking in a new low rate now before they go even higher. I've refinanced three different properties over the past 13 years multiple times, and my combined interest savings a month is roughly $4,000. That adds up to well over $1,000,000 in interest savings over the life of the loans!

If you can find a home that's a good deal, you can afford the payments, and plan to stay there for 10+ years, then I would take advantage of record low interest rates and buy property.

Great alternative to LendingTree

You should also check out Credible, another great lending platform that allows you to compare multiple rates and lenders for free. The more options you have, the better. I like Credible better because they aren't as aggressive as LendingTree because they have a different business model.

About the Author: Sam began investing his own money ever since he opened an online brokerage account in 1995. Sam loved investing so much that he decided to make a career out of investing by spending the next 13 years after college working at two of the leading financial service firms in the world. During this time, Sam received his MBA from UC Berkeley with a focus on finance and real estate.

In 2012, Sam was able to retire at the age of 34 largely due to his investments that now generate roughly $250,000 a year in passive income largely thanks to new investments in real estate crowdfunding. He spends time playing tennis, hanging out with family, consulting for leading fintech companies and writing online to help others achieve financial freedom.

About Financial Samurai: FinancialSamurai.com was started in 2009 and is one of the most trusted personal finance sites today with over 1.5 million organic pageviews a month. Financial Samurai has been featured in top publications such as the LA Times, The Chicago Tribune, Bloomberg and The Wall Street Journal. LendingTree Review is a FS original post.

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