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Old 05-31-2009, 05:05 PM
 
95 posts, read 487,594 times
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Yes, they are still historically very low, but the average rate for a 30-year fixed is now ~5.5%, where it was 4.75 or 4.875 only a week ago. Of course the day I went to lock in a rate is the day after they shot up.

Here is my question... With the particular lender I am using, there is a $500 option which allows me to lock in at the market rate one more time, up until 5 days before closing (mid-July). Do you think I should use it? I have to pay for the option up front, and it's not refundable (i.e. if the rates don't come down, I lose the $500). The rate I locked in was 5.375 (from my limited research it seemed to be roughly the best rate between Wed and Fri with no points).

I'm hearing on various articles that it looks like the rates will probably never again hit the lows we've had the past few months, and the recent rise was due primarily from an inflation scare (which won't really go away). But, I'm wondering if they can go back down to 5% maybe. Then the $500 would be well worth it. Even if they came down just an 1/8 of a point I would make the 500 back in 2 years. 1/4 I'd make back in a year, and 3/8 I'd make back in 8 months (roughly). I don't plan to stay at the place forever, but maybe 5-10 years.

What do you think? Very interested in hearing everyone's thoughts...

Thanks,
Mike
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Old 05-31-2009, 06:21 PM
 
1,551 posts, read 4,292,502 times
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I think it's always a good idea to lock a rate as soon as possible if you're going to buy a house. The certainty of knowing what your monthly payments will be is a huge benefit and well worth the cost, especially in these uncertain times.

That said, it may be just a matter of being penny-wise and pound-foolish: if you're thinking you may need to sell the house in 5 years, think for a moment what rising interest rates is going to do to the home's value. You may find yourself stuck with a good rate and a house for which you owe more than you can sell it when the time comes.
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Old 05-31-2009, 06:46 PM
 
95 posts, read 487,594 times
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Hi Lusitan. Well, I've already locked in my rate, which I am comfortable with financially (though psychologically uncomfortable considering I was expecting to get it around 4.875... oh well).

So the real question is do I take the "bet" that interest rates will go down before mid-July and spend the $500 (buying the opportunity to lock in again later if I want if the rates drop), or save the $500 if I think that interest rates will not go down further.
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Old 05-31-2009, 08:15 PM
 
Location: Long Branch
390 posts, read 1,416,483 times
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When do you have to let them know? Can you see what the rates are on Monday and Tuesday and then decide?
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Old 05-31-2009, 08:15 PM
 
Location: Montgomery County, PA
2,771 posts, read 5,787,011 times
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Quote:
Originally Posted by mtoneil View Post
Hi Lusitan. Well, I've already locked in my rate, which I am comfortable with financially (though psychologically uncomfortable considering I was expecting to get it around 4.875... oh well).

So the real question is do I take the "bet" that interest rates will go down before mid-July and spend the $500 (buying the opportunity to lock in again later if I want if the rates drop), or save the $500 if I think that interest rates will not go down further.
I doubt that they'll go down. The government is borrowing a lot of money, and because of this, they are losing control of the 30 year bond rate, and that puts a floor on 30 year mortgage rates. The market could become less risk-averse if they smell enough "green shoots", but as long as they smell inflationary pressure, the money (that is currently tied up in short maturity treasury securities) is more likely to be split between equity, commodities, and floating rate debt instead of long term fixed income.

What, precisely, does the $500- buy you ? (to put it another way, what prepayment options do you have if you don't spend the $500) ?
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Old 05-31-2009, 08:21 PM
 
Location: Cranford NJ
1,049 posts, read 3,720,844 times
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I just received a letter from my lender for the rate adjustment on my mortgage, the new rate will be 2.85. This is an ARM and overall have been way ahead of the rates. If you want a better rate, go ARM.
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Old 05-31-2009, 08:49 PM
 
27 posts, read 132,189 times
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Trillions being printed up for the stimulus. Inflation is creeping up now but in the long run it will ramp up quite a lot. This may be the last good year to buy at these historic lows but the lowest of the lows are gone forever in my opinion.
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Old 05-31-2009, 08:59 PM
 
95 posts, read 487,594 times
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Originally Posted by FBone View Post
When do you have to let them know? Can you see what the rates are on Monday and Tuesday and then decide?
My understanding is I can let them know pretty much at anytime. If I see the rates going down, I can send the check in. However by the time the check is delivered and processed, it could be a few days, at which point the rates could have changed already (maybe for the better, maybe for the worse). My understanding is I can lock in only after the check is cleared. If I pay it now and just wait (i.e. "hope") for the right opportunity to lock in again, I could do it at a moment's notice since the check is already processed. It does a little fishy, but I just think that's how the lender operates.
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Old 05-31-2009, 09:03 PM
 
95 posts, read 487,594 times
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Originally Posted by elflord1973 View Post
What, precisely, does the $500- buy you ? (to put it another way, what prepayment options do you have if you don't spend the $500) ?
The $500 buys me a float-down option, which apparently can be payed at anytime. But only once the money clears can I actually lock the market rate in again, hence the benefit of pre-paying. Does this sound fishy to you? Like I should be able to just verbally lock in the new rate so long as the $500 is received within the next few days.
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Old 05-31-2009, 09:10 PM
 
1,928 posts, read 3,116,173 times
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Quote:
Originally Posted by me3tv View Post
Trillions being printed up for the stimulus. Inflation is creeping up now but in the long run it will ramp up quite a lot. This may be the last good year to buy at these historic lows but the lowest of the lows are gone forever in my opinion.


As this entire economic situation has taught us nothing is out of the question. Higher rates anytime in the near future would ruin the real estate market worse then it already is ruined. Rates will stay somewhere around 5 to 6 for the next year or so.
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