Welcome to Mortgage Gamblers Anonymous!
Welcome to the first meeting of Mortgage Gamblers Anonymous. Our support group is here to help those that sit on the fence checking mortgage rates day after day, yet cannot bring themselves to actually lock a rate. They possess a grave fear that the minute their rate is locked, mortgage rates will suddenly drop. To their chagrin, stomachs turn as mortgage rates go up, when great rates were available only yesterday. Yes, this is a horrifying disorder that unfortunately affects millions in our country. It needs to stop!
Working together, we can make a difference. Those sitting frozen in fear, glancing at their latest mortgage rate quote, can and will say “Lock My Rate!” They will not feel remorse if rates drop after commitment. In fact, our ex-mortgage gamblers will rejoice in the knowledge they made a wise financial decision that will produce benefits for years to come.
First up…. My name is Power Arms and I am a Mortgage Gambler. Alleluia! The crowded room cheers in excitement at the revelation, tears flow, and one by one all members admit they are in fact ….. Mortgage Gamblers!
You too, can make this courageous affirmation and end your suffering! Don’t worry, all Mortgage Gamblers Anonymous member identities are held completely confidential by punishment of a rather large mortgage pre-payment penalty for those who leak names.
Ok, I might have gone slightly overboard with our new club, but my fellow mortgage professionals and I work with this situation on a daily basis. Literally thousands upon thousands of rate shoppers looking for the best mortgage rates, are eligible for a rate that will bring substantial immediate and long-term benefit, yet state …. “I’m gonna wait for rates to drop a bit more”. Rates promptly rise and reduce their original benefit opportunity. The common follow-up response …. “I wish I locked the rate with the first quote you gave me …. I think I’ll wait for rates to drop to get that first deal”.
Don’t feel bad if you fall into this category, you have plenty of company. My unofficial guess is that more refinance mortgage shoppers wait for a better deal, rather than lock immediately, even when the benefits are quite substantial.
Refinance rates are still near historical lows, so rate shoppers should keep in mind that currently, there is not a lot of room for rates to drop. Yes, maybe there is room for a one-half to three-quarters percentage rate drop under perfect conditions, but recent underlying economic factors suggest otherwise.
Look at it another way. A half-point reduction in rate on a $200,000 mortgage will result in savings of roughly $60 per month. Now, assume that refinancing at the current rate will save you $300 per month. You decide to wait because you want that extra half-point cut in rate, although the odds are not in your favor. If you have to wait one year to get your dream rate, you lose $3,600 (12 months x $300 initial savings benefit). You wait three years, lose $10,800. Wait five years, you lose $18,000!
Now, assume that you timed things perfectly and got that one-half point cut in rate the following week (repeat- highly unlikely), which results in a monthly savings of $360. Over five years you would save $21,600 as opposed to the $18,000 savings by locking your original rate quote. The difference in savings is only $3,600 over five years.
Would you risk losing a “sure thing” $18,000 five-year savings over a high-risk wait for a rate drop that will only save an additional $3,600? I hope not!
Every once in a while, we have to bring out the “Tough Love” here at the Refinance Tool Box. Mortgage Gambling is a tough addiction to break, but we know you will overcome! We hope that you will be able to “Lock that Rate” when presented with a beneficial refinance scenario, and not be that guy who risks and loses multiple thousands, gambling to save a few extra bucks.
May the Mortgage Rates be with You!
Refinance Tool Box
Working together, we can make a difference. Those sitting frozen in fear, glancing at their latest mortgage rate quote, can and will say “Lock My Rate!” They will not feel remorse if rates drop after commitment. In fact, our ex-mortgage gamblers will rejoice in the knowledge they made a wise financial decision that will produce benefits for years to come.
First up…. My name is Power Arms and I am a Mortgage Gambler. Alleluia! The crowded room cheers in excitement at the revelation, tears flow, and one by one all members admit they are in fact ….. Mortgage Gamblers!
You too, can make this courageous affirmation and end your suffering! Don’t worry, all Mortgage Gamblers Anonymous member identities are held completely confidential by punishment of a rather large mortgage pre-payment penalty for those who leak names.
Ok, I might have gone slightly overboard with our new club, but my fellow mortgage professionals and I work with this situation on a daily basis. Literally thousands upon thousands of rate shoppers looking for the best mortgage rates, are eligible for a rate that will bring substantial immediate and long-term benefit, yet state …. “I’m gonna wait for rates to drop a bit more”. Rates promptly rise and reduce their original benefit opportunity. The common follow-up response …. “I wish I locked the rate with the first quote you gave me …. I think I’ll wait for rates to drop to get that first deal”.
Don’t feel bad if you fall into this category, you have plenty of company. My unofficial guess is that more refinance mortgage shoppers wait for a better deal, rather than lock immediately, even when the benefits are quite substantial.
Refinance rates are still near historical lows, so rate shoppers should keep in mind that currently, there is not a lot of room for rates to drop. Yes, maybe there is room for a one-half to three-quarters percentage rate drop under perfect conditions, but recent underlying economic factors suggest otherwise.
Look at it another way. A half-point reduction in rate on a $200,000 mortgage will result in savings of roughly $60 per month. Now, assume that refinancing at the current rate will save you $300 per month. You decide to wait because you want that extra half-point cut in rate, although the odds are not in your favor. If you have to wait one year to get your dream rate, you lose $3,600 (12 months x $300 initial savings benefit). You wait three years, lose $10,800. Wait five years, you lose $18,000!
Now, assume that you timed things perfectly and got that one-half point cut in rate the following week (repeat- highly unlikely), which results in a monthly savings of $360. Over five years you would save $21,600 as opposed to the $18,000 savings by locking your original rate quote. The difference in savings is only $3,600 over five years.
Would you risk losing a “sure thing” $18,000 five-year savings over a high-risk wait for a rate drop that will only save an additional $3,600? I hope not!
Every once in a while, we have to bring out the “Tough Love” here at the Refinance Tool Box. Mortgage Gambling is a tough addiction to break, but we know you will overcome! We hope that you will be able to “Lock that Rate” when presented with a beneficial refinance scenario, and not be that guy who risks and loses multiple thousands, gambling to save a few extra bucks.
May the Mortgage Rates be with You!
Refinance Tool Box
Labels: business, finance, mortgage rates, refinance
posted by Jim Bisnett at
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