Well, folks... we've seen yet another week of the headlines squawking about plummeting mortgage rates here in Winter Haven, Florida and across the nation.
Eyes bulged and exclamations roared as the papers let fly with Freddie Mac's recently published mortgage rate resting at a very alluring 4.96 percent, the lowest since the survey started in 1971! (Cue the Awhooooogahhhh Horn!)
Ah, but wait. There's more....
You see, if we but take a moment to curb our enthusiasm and peer behind the proverbial Winter Haven home loan rate curtain, we find that there's another part of the story worth watching. Mortgage rates are falling but the number of points required to lock those rates is not.
Mortgage Rates Plunge as Mortgage Points Climb
Yup, your recently bailed out mortgage bank is requiring an average payment of 0.7 points to lock in that sexy 4.96 percent mortgage rate the headlines had us all screaming about like a bunch of scalded chimps. That's up from 0.6 percent last week and 0.4 percent a year ago.
Mini Mortgage Lesson: A "point" is a fee equal to 1 percent of the loan size.
So, if soon to be Henrietta Homeowner or Renee Refinanceer wants to gain access to a 4.96 percent interest rate on a $200,000 home loan, Larry the Lender is going to ask for an extra $200 bucks over what he'd ask for only last week... and a whopping $600 more than what he would've stuck you for last year.
Here's how it breaks out: .007 x 200,000 = $1,400.00
You got it, folks. Borrow $200,000 at 4.96 percent today, and you're going to pay $1,400 for it in addition to the "typical" closing costs accompanying a purchase or refinance, which run anywhere from 3 to 5 percent of your loan amount.
Make no mistake - Winter Haven, Florida mortgage rates are lower today than they've ever been. This said, the cost of getting access to these low rates is rising. Since that doesn't make for great news, you won't see it in the papers.
Guess you're lucky you happened upon this blog, eh?
(Image courtesy: The Wall Street Journal)
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Great post, I just cringe when my client tells me that they happened to speak to someone at their local bank and the rate quoted there was so much lower. Obviously, they do not disclose the up front costs. In my opinion, there are only a limited number of very special circumstances when it make good financing sense to buy down the rate.