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How to lock the lowest rate when you refinance

Gross domestic product, the measure of economic output, fell to 1.7 percent in the second quarter of the year, down from 2.0 percent the first quarter. Stable, consistent economic growth should reach about 3 percent. The GDP number actually represents an upward revision due to a jump in domestic sales.

We may be nearing the next phase of quantitative easing (QE3), if you can believe the pessimistic comments from the Federal Reserve. The Federal Open Market Committee admitted recently that growth needs to be stronger, and if the economy doesn’t pick up, we could be in line for QE3 “fairly soon.” The next FOMC meeting will be on September 12 and 13. Make sure to pay attention – markets will move based its findings.

[Editors Note: due to Labor Day, we haven’t posted new interest rates to begin the week. EDIT: Rates have improved by half a point to continue their downward trend. Click HERE for more! For now, we leave you with commentary from Central Coast Lending’s Jason Van Dyke about the volatile market, swinging interest rates, and the best way to refinance and lock in the lowest rate.] 

After a period of relatively uninterrupted drops in interest rates, market volatility is creating rather significant swings in closing costs scenarios that can leave borrowers frustrated and confused.

A good client and friend of mine called me a few weeks ago to refinance his $350,000 mortgage from 4.625 percent down to 3.625 percent. This interest rate reduction would save him about $265 per month and had an estimated closing cost of $2,500. Under these conditions, it would take him just 10 months to recoup his closing cost (in savings from the reduced monthly payment). After reviewing the plans, he called me just 36 hours later to say “Let’s move forward.” Unfortunately, the rate was already gone.

Due to movement (volatility) in the markets, his closing costs for his scenario went from $2,500 to almost $5,000!  In just 36 hours his closing costs doubled simply because of the bond market movement which negatively affected interest rates.

Luckily, the volatility kept rates moving around, rather than settling at this higher level. I watched interest rates over the next week and when the time was right, we locked in a closing cost structure that ended up working out better than what we originally quoted – just $800!

Written by Central Coast Lending - Go to Central Coast Lending's Website/Profile