Well, that is the question isn't it? Buyers ask me, Realtors ask me, colleagues ask me, my mother just asked me last week, "Is it a good time to lock in my rate or should I wait for something better?". This is both complicated and yet very simple. There are thousands of people over thinking this on a daily basis, but my approach is simple. LOCK IT UP, and here is why-
#1 I have no idea what the market will do tomorrow.
There are people much smarter than I that are paid to predict the market and for the most part they do it with mixed results at best. The truth is that I don't have a crystal ball and neither do you. The uncertainty in the market is a constant. I felt certain I'd never be able to lock in anything below 5% back in 2007 and then in 2010 I thought anything below 4% would be crazy and then in 2011 and 2012 we had a few days we locked in below 3% on 30 year fixed loans. I have clients who locked into lower rates with me 5 different times in the last decade. That's OK, as long as the rates drop enough to recoup any closing costs or there are no closing costs. At least my clients knew with certainty each time that they were moving in the right direction.
#2 I assume if you are even contemplating a lock that it benefits you and it's better than what you already have.
In a decreasing rate environment I am a fan of low closing cost loans so that we might be able to take advantage of lower rates in the near future, but if those lower rates never come at least we've locked into something better than what you already had. Some savings is much better than no savings. Gamblers in Vegas have a tendency to sit too long at the card table and most people who are up on the chip count fail to walk away until the house is up again. Locking in a rate that's better than what you already have is like cashing in the chips while you are still ahead. There isn't any rule that says you can't come back and play another day, but most people don't realize that on $200,000 a.125 rate variance will equate to over $10,400 in payments. If I gave you a $10k chip today and said you could definitely keep it today, but tomorrow you may or may not lose it depending on what some suits in D.C. and Wall St. do, most people would see fit to pocket the money and not risk it.
#3 The pain of losing money outweighs the pleasure from gaining it.
Is it better to have loved and lost than to have never loved at all? Maybe, it seems that most people need to make a few bad financial decisions before they realize that they don't want to incur that pain again, so maybe losing money is at least a valuable lesson. Remember what it feels like to make a bad decision? That feeling is quadrupled when it's a bad decision regarding your largest financial asset. Did you get an interest rate locked in at 3%? I didn't and I'm in the business and most of you didn't either, but a few thousand people did and they were the lucky ones. Yesterdays rates are spilled milk, we can't cry about it so let's just lock into something that helps today. If a better option comes along again in the future make sure you are working with someone like myself that will track your mortgage and rates and let you know when opportunities come around again.
If you get the opportunity to lock in a better rate than what you had yesterday, take it. It might be gone tomorrow, the markets could move, the guidelines could change, you may switch employers or have a family emergency and that 10k for each .125 rate reduction is gone into thin air. If your banker calls and wants to give you a 10k chip, answer the call and lock in the rate. Heck, ask him if he can find another chip in his back pocket, he may have to ask a supervisor to get it done or he may ask for some closing costs but if you don't ask you'll never get it. Even if he/she says all the chips are on the table, take the deal. Cash in the chips and pat yourself on the back, you just got one over on the house.
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