Timing plays an important role in so many things in our life. There is something to be said about being in the right place at the right time. Buying a stock, purchasing a house, or asking for a raise, are all about timing. Now, refinancing also requires a little bit of timing as well.
Earlier today, I spoke to a couple looking to refinance their current mortgage. They bought a few years ago and decided to take out an interest only loan. This is simply a loan that does not require any of the principle to be paid monthly. Rather, you pay just the interest each month and your mortgage balance remains the same. The loan my customers are in is a 5 year adjustable, so in another couple of years, the interest rate, along with the payment will change. They will be required to pay principal in a few years as well.
This morning was a great morning for many mortgage professionals. Rates opened very low and all signs pointed towards a busy day. I was working with quite a few customers that were about to lock, I locked a few early in the day. The customers I spoke about above called in this morning to ask a few more questions. I answered all their questions, but they decided that they wanted to wait it out a little longer and see if maybe they could get a little closer to 5%. Apparently, 5.5% wasn't a strong enough rate at the time.
At 1:47 this afternoon I got my first email from a lender stating that they were going to increase interest rates. I immediately called my customers to inform them of what was happening. One problem....voice mail. I asked them to give me a call back so we could lock before we saw any other major increase in rates.
3:11 PM. Same Company sent over a second rate change for the day. Rates were still increasing, and all the companies were in line. I received about 15 emails in the next 10 minutes about rates worsening. (I hate this word and would love for someone to come up with something that does not sound like my 5 year old talking). I figured since I already called once, I would send them an email and let them know what was going on. We were so close this morning, but they just were not ready to pull the trigger. I almost locked their loan for them at this time on a hunch, but didn't. This may be a huge error on my part, but felt that I would move when they were ready.
5:50 PM. Same company, same result. Prices Worsened Again! Still no contact with the borrower. One company I worked with had increased interest rates by .50% since earlier this morning. On a $300,000 loan amount, this is equivalent to $95 a month over the next 30 years. One day's pricetag is $34,200 over the next 30 years!
Now, I get to sit back and wait for my clients to call and tell me that the new payment is going to be too high and they will just sit back and wait. After all, they have 2 plus years remaining on their current adjustable rate and can live with where they are now. But what if rates don't come back down? In the back of my mind, I believe they will, but what if? Was the reward of $19 a month worth the risk of $95 a month?
Now before I get the emails about rate protection and negotiating rate, I understand and know all of this. I locked a few loans today and will offer my clients even better rates if they decrease. But in this case, I was completely at the mercy of my client. Should I have been more pushy? Should I have sold them harder? What's the saying? You can lead a horse to water.....
So, my one lesson I would like to give to anyone out there considering a refinance in the next few months, or for those of you like me in the profession. Make sure you have a rate in mind that will make you move!
Once all of the short term and long term goals are discussed, make sure everyone knows what rate will make things move forward. If I would have got a rate that my clients were happy with up front, I could have locked them without talking to them this morning and everyone would have been happy. I try to do this with all of my refinance clients, but failed to do so on this one. Now I have to sit back and wait for the call. I don't know what is more fun, waiting for the call, or watching the rates skyrocket all afternoon. Good stuff!!!