It is natural to think of rates going down with all of the misinformation bombarding our airwaves. One national advertiser is promoting the idea that because the Federal Reserve's Open Market Committee has cut its rates that mortgage rates have gone down as a result. Never mind that a rate of 5% fixed is quoted while omitting the REQUIRED disclosures of APR, total of payments, total finance charge and monthly payment. People just hear the 5% and that just invites a bait and switch. By promoting the donation to a well known charity, they further the deception. After all, people who are donating money to charity would never mislead someone, would they?
Waiting for the rate that will never come is a game that many people play. The lowest point this year for 30 year fixed rates was the day the FOMC made its initial rate cut. We haven't been there since. Many people are waiting on the Federal Reserve to lower rates thinking that mortgage rates will follow. The opposite often happens.
Let's suppose you are waiting for 5.75 as your mortgage rate, but 6% is the no point rate that has been reached most often. On $150,000 mortgage, the difference is a little over $23 or about 80 cents a day. If you could have refinanced at the 6% rate from 7%, you could have saved a significant amount of money, but you passed on it because you were sure that rates would drop even further. Suppose a year goes by and the rate you wanted never arrives. And the next best thing goes away as well? For the want of less than $300 in additional savings, you may have passed on savings of several times that amount by waiting.
Some folks will press you to refinance at the slightest drop in rate from your present one. That is not a good idea. Saving 1/2% on your note rate will not accomplish a lot for you. It may take years to recoup any closing costs. Which brings me to another point. Whenever you hear someone promoting 'no closing costs', you are paying them in the form of a higher rate. What it boils down to is this: If the payment savings is something you are happy about, then move forward and don't look back. It can cost you alot of money if you are waiting for the perfect rate.
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