Refinancing and Rate Drop

[merlinmagic4]

Hello,

Quick question.......I know someone's out there :)

We are refinancing and the rates just dropped a quarter point. Will they give us the lower rate or will we be able to pay less points to keep the rate we paid points to get (we paid 1.875 points I think). Just curious if we are locked in against dropping rates as well as higher rates. We are supposed to talk to her this afternoon to set up a closing date. Are we too late?????

[offwego]

We are supposed to talk to her this afternoon to set up a closing date.

Does your offer/paperwork have a clause in it about rate drops? Here in Canada you get the lowest rate over your "commitment period" typically 90 days back from your closing date.

However the easist way may just be to ask.

[merlinmagic4]

Does your offer/paperwork have a clause in it about rate drops? Here in Canada you get the lowest rate over your "commitment period" typically 90 days back from your closing date.

However the easist way may just be to ask.

I am going to ask but I didn't want it to be a "stupid" question :blush: I'll have to go read the fine print! I don't remember anything there but I'll look!

[Jeff G]

If you locked your rate already you are committed to that rate unless you change to a new company. When a rate is locked the bank commits to giving you the rate even if rates rise but if rates go down then it is your loss. On a side note, the fed's cut rates this week but mortgage rates have been on the way up everyday since last Wednesday. Last week my 30yr was 5.875% and today it's 6.375%. The rate the fed's adjusted generally has no bearing on fixed rate mortgages. Car loans, CC' ans some variable rate mortgages will see the rate cut benefit. Mortgage rates are generally linked to bond rates which gets complicated.

Are you buying down the rate with the points? If so shop around before you close and make sure that you can't do better without points.

[Jasper]

Also make sure you understand the actual effective rate. I don't understand what the difference is but the last 10 years or so whenever we have done any financing they have quoted us one rate and then when we closed the had an actual effective rate that was always higher. It is not a matter of bad credit, it is rather something to do with how they make the actual calculations. I don't claim to understand it but it sure seems like some kind of bait and switch tactic to me but it is perfectly legal and they all do it now.

[kakn7294]

It all depends on how far into the commitment you are and whether there is a clause about lower rates. It's not a stupid question - definately ask it. Even if there isn't a clause about changing rates in your contract, there might still be something they can do.

[merlinmagic4]

Thanks, everyone! They did say we could negotiate the rate but they would charge us (I think) a half point to lower the rate by 3/8 or something like that. It wasn't worth it.

Yes, we did lower the rate by buying points but I feel we did get the best deal we could. We are dealing with the same bank we've dealt with for years. It was really easy to do it with them, too.

I did read about the locking process after offwego's post. You can do some kind of "float" lock where you can get the lower rate if it goes down but we didn't do that. That wasn't something we thought of or decided ourselves. It was decided for us.

Anyway, thanks for the input! Hopefully the next time we do this, we'll be refinancing to a 15 year loan to buy back all the years we've lost!

[offwego]

Also make sure you understand the actual effective rate. .

Actually Jasper this has much to do with how you may choose to pay and what other things you chose or didn't realize you chose to add in.

For instance a non monthly payment option could come with a fee that you pay in rate instead of up front etc.