There are a lot of questions in the minds of homeowners about when is the right time to lock in a new lower interest rate in order to refinance, especially with the Economic Stimulus Plan of 2009. There is no perfect time, especially in the up and down times that we're experiencing now.
The following is an excerpt from a phone call I had with a homeowner who was questioning locking a home loan refinance:
As far as the 2009 Economic Stimulus Plan and its effect on mortgage interest rates, there is no crystal ball. If there were, you and I wouldn't be on the phone as I'd be retired by now. What I do know, from what was in the news, is that I understand that any rates that will be influenced by the plan will be in the form of home purchase rates primarily for first time home buyers. This will be an artificial rate reduction given the Feds "bailout" position of Fannie Mae and Freddie Mac. Refinance rates will be left to be influenced by market forces.
For example today, rates got worse at the end of the day which was a surprise given the news of the stimulus package passing.
Property Values Continue To Decline Versus Lowering Mortgage Rates
This may not affect you, but in many parts of the country property values continue to decline which significantly impacts a homeowner's ability to refinance if they are on the edge of a program guideline and their loan to value. By waiting someone can wait themselves right out of the ability to refinance.
In your case, a change in rate by .125% changes your monthly payment by $29. Now, I can't pass judgment over whether to you that is a big deal, but in terms of your income etc. $29 one way or another will have very little impact in your monthly budget. We're looking at a rate lock of 4.875 which by any standards is a great rate. If rates drop another percent to 3.875 I would say it is time to look at refinancing again, but will they get that low? Who knows.
By waiting on the stimulus bill's impact on rates, you do run the risk of rates and the market responding in an unfavorable way. I have had a few other customers waiting on rates and they have now been waiting about two months and they are now facing spending more money to redo their appraisal as the market has changed etc.
Mortgage Loan Program Guidelines Change Very Quickly
One other issue that may or not be a problem is that programs change quickly in our current mortgage environment. I don't think you will fall into the category of marginality as your loan scenario is as good as they get, but while the program and rates are there and you fit them and you are really wanting to refinance, then it is typically best to strike while the iron is hot.
With all this said, my advice is to lock and close your while the window is open. Meaning, that if you have an appraisal on your home and your loan file has been underwritten but you haven't locked you may consider locking. If you have already looked at the monthly payment and it well within your budget then waiting could be a stupid move if rates all of a sudden go up. Second guessing can cost you an opportunity, some sleep and in the grand scheme, it won't amount to that much money on a month to month or a long term basis. We have you set up for a very nice loan.
Please let me know what to do when you talk this over with your husband. (after this discussion and in about an hour after speaking with her husband, we locked the loan)
Articles on Refinancing
I Am Waiting For Mortgage Interest Rates To Go Down Before I Refinance
Refinance And The Decreasing Interest Rate And Property Value Dilemna
Refinance My Mortgage And Property Values Going Down
Article on Buying a Home With Property Values And Rates Going Down
Buying a Home In A Declining Market With Rates Going Down
