subject: Why You Need to Lock In the Rates Right Away [print this page] Are you applying for refinancing and you want to lock in the rates? Remember that submitting the application will not result to automatic lock in. So you need to know the best time to apply for rates lock in.
Because of the rock bottom interest rates recorded in the previous months, many homeowners who are refinancing their mortgages are confronted by this issue. It is important to understand if floating or locking would be the best course of action that you need to take when applying for the loan.
Locking or floating the interest rate would be similar to playing the stock market behavior. In the stock market, you have to closely look at the movement of stocks before you decide to buy or sell. Some borrowers who are refinancing their loans apply the same wait and see attitude when deciding to lock-in the rates. In most cases, such strategy often results to failure or great disappointment.
There are many borrowers who would patiently wait for many months and even years for the interest rates to go down. They will only apply for refinancing if the interest rates hit rock bottom. The problem with this approach is that you will surely miss out on great savings if you continue to wait.
For example, if you refinance your mortgage loan immediately from 6.25 percent to 5.25 percent, then you could probably save at least $200 monthly. This is the benefit that they can not see because they are waiting for the rates to further go down to 5.125 percent. You have to focus on the immediate savings that you can enjoy if you will refinance immediately. If the rates are already reasonable, then the best action is to consider refinancing right away.
You have to remember that you can always refinance again after six months of closing the first refinance deal. If you see that the rates are dipping further, then apply for another refinancing.
The usual scenario is being repeated over and over through the years. When the rates started to drop, there will be an instant rush of applications for refinancing. There are borrowers who grab the current low rates, apply for refinancing, and immediately lock-in. These borrowers are generally happy and satisfied after two months of getting good savings because of their low monthly payments.
On the other hand, some borrowers defer locking in their interest rates. They are hoping that the rates will further go down. Unfortunately, the rates will start to spike again and increase quickly. Sharp rebound of interest rates is common. Since 1980, the rates will go down very slowly. But they will go up sharply within hours. It means that the rates will not stay low for a very long period. And when they go up, it would be too late for you to lock-in.
When you see a good drop in interest rates, it is probably time to apply for a lock in. Locking in may involve some costs so you need to know if you are allowed to make a refund. Just remember that an extremely low interest rate proposal should be approach carefully.
