Mortgage Blog

I got lots of rate inquiries recently. And most of the questions were: Do I need to lock this rate?

For all those clients, they have very low ARM rate. The lowest was 5/1 ARM 2.25%. I know we do not have that low rate any more. Then we will have to decide whether we need to lock the rate now, which rate to lock?

Here is my opinion:
1)5/1 ARM 2.875% to 3% rate is very good rate under current market. Do not expect the rate will be much lower from here. We are in different market now.
2)If we expect the rate back to pre-election level, it would take something big and unexpected happenings.
3)So if your ARM rate is very low(like 2.25%, 2.5%), you can refinance when the fixed period expires. The reset rate will be around 3.875% to 4%, depends on the one year Libor index.
4)If you want to switch to fixed rates, then you can lock one and proceed the refinance first. If the future rates go up, then you have the best fixed rate(after election). If it goes down, then you can refinance again.
5)For cash-out loans, since the cash is more important, then the sooner the better. The gain from the business opportunity is much higher than the interest rate cost.

And we normally tried to maximize the investment returns. Like I explained to the blogs a few years back, the best investment is ourselves. We can either improve the technical skills so that we can have more opportunities, or we can investment on the exercise so that we have good health. For myself, I did investment on both. I have been in the top 1% category of the loan originators in the state of California for the past 14 years. I also spent a lot of time for the running, Yoga, personal training etc. Though I spent a lot money on the travel costs, the race costs for all those Marathons, I can cover them all if I can work one extra year for my mortgage business.
 
When the mortgage rates were low, some of the prospects were comparing the rates, and I told them the money you can save on 0.125% rate difference is only around $50 a month, $600 a year. But if you can get a raise, or even make one tiny good decision on the stock investment, you will have all the money back. But if does not mean you do not need to refi when the rate was low. What I meant was that you do not have to spend too much time on it once you made the decision.