Timing the market, determining the best time to lock in your mortgage rate when refinancing your house, welcome to the numbers game. Mortgage rates fluctuate just the way a stock ticker does, so identifying whose a better priced loan lender, at any given point in time, can be an ever more complicated process. That is unless you have two side by side comparisons at the exact same time, but who can do that? Here’s to navigate current refinancing rates to secure the best deal.

Allow For Variances

If you missed the refi boat in the last few months, not to worry, rates are still historic lows. Bond price gyrations (rate movement) are still eminent making possibility of rates dropping sub 4% on 30 year mortgages, unlikely. Rates we saw in March/April 2013 will probably forever remain…history.

Finance Tips:

• Rather than searching by rate alone, search within a “range”, competing lenders are usually between a quarter percent of each other
• Expecting to pay no points? That might change depending on the rate sought. A small percentages of discount points could be applicable run anywhere from .125 to over 1% of the loan amount.
• Locking in without an appraisal? Know this: your interest rate/term is “subject to change” because an interest rate lock is based on a loan to value (how much the lender is  willing to lend you vs. value of the collateral i.e. the house)
• Credit score under 740? Allow for greater potential interest rate variances by at least .375% in rate
• Appraisals run the show- can change the amount of mortgage insurance required if less than 20% equity
• Allow for flexibility on closing costs by at least $1000. Thousand dollars seems like a lot of money and it is, so if you’re quoted $2700 for closing costs and you allow for a variance of $1000, if the appraisal costs changes and sometimes they do based upon the scope of work required, for example or if the market dictates percentages of discount points associated with your interest rate, these can increase the total closing costs.

When To Consider Locking The Refi Rate

This will be different on your goals, expectations and property occupancy eight e.g. primary home, second home or investment property use.

Locking upfront for 30 days upon appraisal order– locking in your interest rate upfront when you order the appraisal is certainly something most lenders can be accommodating with. Major risk is if your valuation does not come in at what you precisely say it is, your loan to value could change subject to the property valuation.

If the loan to value is potentially anything 70% or over, it might make more sense to lock once the appraisal comes back. If it is projected appraisal will absolutely show significant equity to the tune of 40% or more, other than market conditions (and high credit score), there is little risk to locking in the interest rate immediately.

Locking upon appraisal  appraisal comes in and lock instantly, allows for no or little chance of change to rate, payment, terms or costs. 

*Another choice is providing your mortgage company your interest rate lock preferences and any applicable pricing adjustments such as discount points with those rates. An advantage to allowing your loan officer to lock in your interest rate  before the appraisal comes in, is getting a better rate prior to a slip in rates (meaning rates rose). As the informed consumer, it’s important to understand your rate and pricing preferences could be available when you’re not i.e. unreachable, so providing a range of lockable loan preferences, gives your mortgage company a sense of the type of pricing you expect.

Ultimately, it’s the choice of the consumer to determine when to lock their interest rate. As more positive economic data services, investors pull their funds out of the fixed income market and move those monies into equities causing the stock market to rally and a deterioration in mortgage rates (rising) ensues. Conversely, when negative or ambiguous economic data services, investors move their money back into fixed income securities, causing yields to rise and mortgage rates to improve (fall). It is instances like these that provides prime opportunities for locking in a favorable mortgage rate.

If you would like to learn more about refinancing, see whether not you qualify, or determine the best course of action with regards to your loan and current interest rates, give us a call or start today by getting a complementary refinance mortgage rate quote.