One More Chance To Lock In the Lowest Rates in Mortgage History!

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Does it sound like you have heard this story before? “Buy now, interest rates have never been lower” or “Refinance to get today’s low, low rates” are words many of us in the mortgage industry have been preaching for months now. In fact, the first time I mentioned this to my clients and audience was back in 2010.

Well the news has changed and it’s changed for the better. Rates are even lower. For the countless happy homeowners that are now living in their dream homes enjoying a monthly payment so low that it almost seems impossible, it was the deal of a lifetime. And for the countless others that ignored the signs our market was showing and neglected to get a refi on their home or buy up – they are now saying “I coulda, shoulda, woulda”.

It’s not too late.

Today, interest rates are even lower than they were in 2010 when I first told you about the three ways you can get a loan. So whether you are interested in a No Cost, Low Cost or Full Closing Cost loan – the stakes have changed and the scales are tipping in your direction! Don’t waste time and end up wishing you locked in great rates while you still could. Do it today. Qualified buyers could be getting rates as low as 4% on a 30-year fixed or even an amazing 3% on a 15-year. Now that you know you want to take advantage of this unbelievable time to buy up or refinance in America – call me today so I can analyize your profile and give you the personal advice you need to move forward. In the meantime, here’s some advice I’ve been doling out for some time now:

1. No Closing Cost Refinance

Like the title says, it means you the borrower do not pay closing costs. The next question is who is paying them? Indirectly you are. By taking an interest rate slightly higher than the market rate, the broker can use the "Premium" in the interest rate to pay all your costs. For the purposes of this example, let's take a look at how this “no cost refinance” works.

For this example only, let’s use 4.875% as lowest rate 30 Year Fixed Rate Loan available today and 5.125% as lowest 30 Year Fixed Rate Loan offered with no closing costs and a loan amount of $400,000. The lower rate will include $2,400 in closing costs. The higher rate will allow me, the broker, to pay all your closing costs of approximately $2,400 in addition to leaving enough gross revenue to cover office expenses and overhead.

2. Low Closing Cost

This is a combination of the “No Closing Cost” and “Full Closing Cost” options. By taking an interest rate slightly higher than the market rate, the lender or broker can use the "Premium" in the interest rate to pay a “portion” of your closing costs.

For this example only, lets use 4.875% as lowest 30 Year Fixed Rate Loan available today and 5.0% 30 Year Fixed Rate offered with low closing costs of $1,000 and a loan amount of $400,000. The lower rate will include $2,400 in closing costs. The higher rate will allow me the lender, to pay a “portion” of your closing costs of approximately $1,400 in addition to leaving enough gross revenue to cover office expenses and overhead.

3. Full Closing Costs

Like the title says, it means you, the borrower, pay closing costs of approximately $2,400. For this example only, let’s use 4.875% as lowest 30 Year Fixed Rate loan available today and you the borrower will pay the $2,400 in closing costs.

Now look at the monthly payments:
$400,000 Loan Amount * payments exclude taxes and insurance
30 year fixed rate loan program (same criteria works for 15 and 20 year fixed rate programs)

4.875% = $2,117 monthly P&I

5.0% = $2,147 monthly P&I

5.125% = $2,178 monthly P&I

Compare: 4.875% v 5.125% (No Closing Costs)
Monthly savings: - $2,117 – 2,178 = $61 lower payment by selecting the 4.875% rate.

Now look at the total costs divided by the savings: $2,400/$61 = 39.3 months or 3.28 years to break even. That means after 3.28 years, the lower rate and paying the closing cost would have paid off.

Compare: 4.875% v 5.0% (Low Closing Costs)
Monthly savings: $2,117 – $2,147 = $30 lower payment by selecting the 4.875% rate.

Now look at the total costs divided by the savings: $1,400/$30 = 46.7 months or 3.88 years to break even. That means after 3.88 years, the lower rate and paying a “portion” of the closing cost would have paid off.

Another factor to take into consideration is the loan to value ratio of the new loan to your home's value. If for example, adding closing costs to your loan puts you into a higher loan to value bracket, you may opt to go with the lower closing cost or no cost option. Or if you have to pay private mortgage insurance by adding in closings cost, you may opt to go with the low or no closing cost option.

After all is said and done, you don’t want to walk away from a closing and regret your decision, or fear that it will negatively impact your pocketbook in the long run. Therefore, precautions and future planning must be executed to ensure you receive the best deal possible.

Not everyone grasps the “closing costs” concept very well, and there are lots of other elements of your home financing that can add up quickly, but I am here to help. If you have any questions about your home or are looking to purchase in the near future, contact me at 402.301.4500 or email me anytime at terry@terrywilliams.com.