June 8, 2009

Too Young To Know Good Mortgage Rates

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Get The Good Rates or Pay The Toll

I am stealing that line from Neil Cavuto of Fox Business Network.

In a recent broadcast of Fox News, Cavuto mentioned how someone asked him about mortgage rates.  The person was hesitant to buy a new house because mortgage rates went back up.  Cavuto asked him what he was going to do… wait to see if they go back down was the response.

Cavuto, in his off tangent thinking, begins to share how “Damn” young this guy is.  But his answer to the potential home buyer was “5.25% is pretty good.”  Then he proceeded to tell the young man to “Shut up.”

Why did Cavuto tell him to shut up?  The answer is pretty simple.  ”5.25% is pretty good.”  Remember when mortgage rates were double digits.  Remember when prime was over 20%.  Remember when…

Most people, if they think hard enough, will remember those days.  Now, doesn’t 5.25% or even 5.75% sound “pretty good.”  Yes, it does.  And yes, 4.75% sounds better.  Unfortunately, those days are in the past, and soon you will be saying I remember when rates were 4.75%.  For those of you who waited to see if rates would go any lower, are now going to say, I remember when rates were 4.75%, but all I got was a 5.75% rate.  But you know what?  That is still “pretty good” compared to what it could be.

So what is the moral of this story?  It is shut up about the rates.  They are going to be what they are.  It is only a matter of how long does a borrower want to wait to lock in their rate.  4.75% is gone.  5%+ is in.  It is still a “pretty good” rate.

Oh, and to put this into monetary terms, a $150,000 mortgage at 4.5% over 30 years has a payment of $706.  The same mortgage at 5.25% has a payment of $828.  That is roughly $30.50 per .25% increase to the rate.  That breaks down to just over $1 per day per .25% increase to the rate.  Can you afford an extra $1 per day to go to your mortgage if rates went up .25% tomorrow.  If the answer is “No,” then you need to do something today.  If the answer is “Yes,”  then can you afford a full 1% increase (or $4/day)?

Each day you spend watching the rates go up is just another dollar that you could have been saving.

Jason Price

Owner/Principal Broker

(352) 308-7219 Phone

For some time now, Knightlines Mortgage Services has been offering the people of Florida a convenient way to finance and re-finance their residential property.

But that isn’t the entire story - we are also doing commercial lending in all 50 states.  AND - now we can offer commercial financing OUTSIDE of the country as well.  Caribbean, South America, etc - just call for the details.

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