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One of the more interesting and frustrating parts of our industry is the rate game.  Mortgage rates have always had some level of volatility but in today’s market rates are all over the place.  For instance,  Yesterday rates came out at 9:00 am (MST) and a 30 year fixed conforming mortgage rate was hovering around 5.25%.   By 10:30 we had our first rate drop of the day down to 5.125%.  A couple more rate drops later and we had a couple banks posting 4.875% rates.  But already by this morning most banks had a rate increase to 5%.   Every day is not like yesterday but when rates move, often times they move quickly.

The question I always get is “when is the right time to lock in a rate?”.  The simple answer is;  you lock in the rate the minute a 30 year fixed rate can save you money.  People tend to forget these days that a 6%  interest rate on a 30 year fixed mortgage is historically fantastic.  Not that long ago my parents were buying their first home and happily paying 10% on their mortgage while needing to put 10% down on the purchase price.   Any time you can get a mortgage with a rate under 6% you are beating the bank.  If you are lucky enough to be buying or refinancing while rates are below 5% you have to do it.  It’s that simple

Each persons situation is different.  If a borrower has a 5% 30 year fixed mortgage already they can play the rate game all day.  We can target a specific rate and the minute it gets there we will lock the rate in and get your loan refinanced.  There is not much to lose when you are already in a great spot.   But a person in an adjustable rate mortgage at 8.99% needs to be very careful with how they play the rate game.   If the rate of the day is at 6% or lower I will always advise this kind of borrower to lock in the rate  immediately.  A 3% rate reduction is going to save that borrower a ton of money.  At that point there is no reason to get greedy.  If we wait it out for an even better rate and the rate goes up by .5% over night they are going to severely cut into their savings.  This mainly comes into play when we are working up against an adjustment.   Timing is everything because the payment will go up after the adjustment, but the amount it takes to pay off the loan will go up as well after the adjustment.  These people are in a tougher spot and because of that you take the rate that saves you a bunch of money and try and avoid any risky waiting games to try and do better.  Getting into an adjustable rate arm was extremely risky in the first place and taking more risk to fix the problem is not the right answer.    Rates are amazing across the board right now and if you take advantage of today’s rates you may never need to refinance again.  What a novel thought, getting a new mortgage and holding on to it for more than 3 years!

The bottom line to all of this is that each borrowers situation is uniquely different.  Some people can and should wait it out for the best possible rate. For some people it makes no sense to wait out the rate because of the huge risk involved.  This is exactly what we are here for.  If a borrower wants to wait out rate, even if we do not think they should, we will help asses the risk and put a game plan in place to try and get them exactly what they want.  This is your mortgage and your decision, we are simply here to educate you along the way.  We don’t sell mortgages, or sell rate, we educate borrowers to make sure you know exactly what you are getting into and know exactly how we can go about getting you into it.

(speaking of rate volatility, the rates went up again while I was writing this post)

Call me or e-mail me any time if you want more info on this topic or any other mortgage, credit, or personal finance issue.

Chris Coates



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