Posted on March 28, 2009.
Some readers may have been confused by my last post about 4.5% (and how to position yourself to take advantage of crazy-low mortgage rates).
For some perspective, on Friday, mortgage rates ended the day around 4.75% to 4.875% on a 30 year fixed and around 4.5% for a 15 year loan for a 45 day lock-in. Of course, those rates could be higher based on your credit score, loan-to-value, combined loan-to-value, etc. (APR’s are 4.917, 5.043 and 4.787 respectively; what a rule follower, huh?)
So . . . if you are thinking about passing up 4.75% to wait for 4.5%, I would consider the math. For each month you wait for lower rates, you are passing up the opportunity to save $$ each month. Let’s say you are going to save $200 per month by refinancing; if you wait 5 to 6 months to refinance, you have lost $1,200 just in the time spent waiting and watching . . . all in an effort to hopefully save an additional $30 per month (0.25% for a $200,000 mortgage is about $30 per month). And the cost of waiting the 5 to 6 months will now take 40 months to recoup at the extra $30 you have saved (this all assuming that interest rates will still be at their all-time historic lows when you are ready to move forward).
I apologize in advance . . .
“So you can keep waitin’ [waitin’], waitin’ on rates to change . . . you keep on waitin’ [waitin’], waitin’ on ra-aa-ates to change.”
Jeffrey Pinkerton is a Mortgage Consultant and President of Hillside Lending, LLC and writer for “the Mortgage Blog.” Hillside Lending seeks to provide mortgage brokerage services with the highest standards of service, care, honesty, integrity and value; concentrating on owner-occupied, residential financing. For more information about available programs and interest rates, please visit www.hillsidelending.com