Yale Roth M.A., M.Ed

This mortgage question relates to both refinance and purchase transactions.

I get this question a lot: “Should I Lock My Mortgage Rate?”

Here’s my answer.

If you determine that there is benefit in the transaction (if you’re refinancing your mortgage), that is – if you’re lowering your mortgage rate, lowering your mortgage payment, and/or reducing your mortgage term, then you’re in a position to lock the rate.

So you’ve looked at the mortgage rate and mortgage payment.  All looks good.

But wait, the mortgage rate my go lower?  Yes?  No?  Remember, mortgage rates can change daily.

My advice to people is if they see benefit in the transaction and they don’t have a tolerance for risk, then they should secure the mortgage rate lock.

On a day to day basis, the mortgage rates are not changing dramatically – it’s the lender cost to get the mortgage rate that change more frequently.

So what you’re “gaming” is the lender cost for the mortgage rate.

You can float your mortgage rate knowing that the lender cost to get the same rate may be $200, $500, or even a $1000 higher the next day – depending what’s happening in the mortgage bond market.

Or conversely, the lender costs for the mortgage rate may go down.  What you’re doing is playing with that money.  The mortgage rate, in all likelihood, will still be available.

If you want to “play” with that lender cost figure in the hope that it will go down or you can get a lower mortgage rate at the same lender cost, then you may want to float the mortgage rate.

However, you can lose as well.

Again, my advice is if you see benefit in the transaction, “take the chips off the table” and lock the rate.

It’s better to be safe than sorry!

Related Posts:

• Mortgage Questions – “What’s The Difference Between A 30 Year Fixed Mortgage And A 10 Year Fixed Mortgage?”
• Mortgage Rate Questions – “Are The Mortgage Rates The Same For A Cash Out Refinance?”
• Mortgage Questions – “How Much Money Is My Mortgage Company Making?”
• Mortgage Rate Questions – “What Happens If My Mortgage Rate Lock Expires?”
• Mortgage Rate Questions – When Do Mortgage Rates Change?