Lock in 30y Mortgage Rate at 3.875%?

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IndexFun
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Lock in 30y Mortgage Rate at 3.875%?

Post by IndexFun »

Hello Bogleheads!

We are set to close on a new house on August 7th and can lock in a 30y rate at 3.875% with a standard 20% down.

I am tempted to hold out to see if rates fall further if the bond rally continues, but on the other hand, know that I nor anyone can predict that with any accuracy. I think mentally I would feel worse if the rate ticked up 20bps to 4.075% versus falling 20bps to 3.675% just because of the mental 4% threshold; so I should probably minimize regret and lock in rates.

Am I thinking about this the right way, should I just lock it in and move on?

Thanks in advance!
Hanksmoney
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by Hanksmoney »

I'm not a fan of 30 year mortgages after I started with one in 2009 at 4.875%. I refinance 3 years ago to a 15 at 3.7%. I gently warm my friends against them b/c of the low ratio of principle to interest you pay during the first 10 years. That principle barely budges.

Just about rate - 3.875% is a fine rate.
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Huygens
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by Huygens »

Congratulations on the new house. If you haven't already, consider reading through a recent thread regarding mortgage rate discounts for moving assets: viewtopic.php?f=2&t=280692. You may be able to achieve a lower rate.
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ResearchMed
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by ResearchMed »

Hanksmoney wrote: Mon Jul 01, 2019 1:07 pm I'm not a fan of 30 year mortgages after I started with one in 2009 at 4.875%. I refinance 3 years ago to a 15 at 3.7%. I gently warm my friends against them b/c of the low ratio of principle to interest you pay during the first 10 years. That principle barely budges.

Just about rate - 3.875% is a fine rate.
One could always pay more, perhaps the monthly amount that would have been required for a 15 year mortgage (or more, or less), IF one wishes to pay the mortgage earlier.
There would be a slight cost of the slightly higher rate, but this method would allow one to switch back to the 30 year required payments (lower than the 15 year payments) if necessary.

RM
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Thorsbane
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by Thorsbane »

ResearchMed wrote: Mon Jul 01, 2019 1:13 pm
Hanksmoney wrote: Mon Jul 01, 2019 1:07 pm I'm not a fan of 30 year mortgages after I started with one in 2009 at 4.875%. I refinance 3 years ago to a 15 at 3.7%. I gently warm my friends against them b/c of the low ratio of principle to interest you pay during the first 10 years. That principle barely budges.

Just about rate - 3.875% is a fine rate.
One could always pay more, perhaps the monthly amount that would have been required for a 15 year mortgage (or more, or less), IF one wishes to pay the mortgage earlier.
There would be a slight cost of the slightly higher rate, but this method would allow one to switch back to the 30 year required payments (lower than the 15 year payments) if necessary.

RM
I think this is a key point commonly missed on BH. Cash flow flexibility is imperative. It allows a household to choose from many levers when in financial distress. Personally, 15 year would have been a great choice when I first bought my house, but now being 5 years in and about to have a second kid, I'm not sure how we would do it. Life changes, be ready!
alfaspider
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by alfaspider »

Hanksmoney wrote: Mon Jul 01, 2019 1:07 pm I'm not a fan of 30 year mortgages after I started with one in 2009 at 4.875%. I refinance 3 years ago to a 15 at 3.7%. I gently warm my friends against them b/c of the low ratio of principle to interest you pay during the first 10 years. That principle barely budges.

Just about rate - 3.875% is a fine rate.
With the flat yield curve, the 15 does not provide all that much of an interest discount. You'd only pay slightly more by taking a 30 year and paying an additional amount towards principal equal to the 15 year amortization. But that also gives you optionality if you have a cash flow setback. If you have a bit more risk tolerance, and would like to pay off your mortgage more quickly, you may be able to pay off the mortgage more quickly with the same amount of payments as a 15 by investing the payment delta and then paying the mortgage off in a lump sum once you are ready. Historically, the market has done much better than mortgage interest rates.

There's also may be a bit of a tax arbitrage opportunity depending on your situation. If you are still itemizing after the new tax law, you may still get the benefit of deducting a large chunk (if not all) of the mortgage interest. That's a deduction against ordinary income at a rate that could be as high as 37%. Your investment gains would generally be subject to a 20% rate, assuming long term capital gains and qualified dividends. Thus, on a 3.875% mortgage if you clear the $24k per-couple standard deduction hurdle with non-mortgage deductions, to "beat" the mortgage interest, your investments would only need a pre-tax yield of about 3%. That's doable with a fairly conservative portfolio. Obviously, many people aren't going to clear the $24k hurdle or have 37% bracket income, but worth considering in case you do.

To the OP: how much are you being charged to lock? I'm in the process now, and was quoted an amount equal to about $1,700 (if converted to buying points) to lock out to mid-august as opposed to a 30-day lock. I decided I could roll the dice for 2.5 weeks on rate changes, as I don't see a massive catalyst for change before the next fed meeting.
kardan
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by kardan »

Lock it. If rates drop .25 or more, just refinance. Depending on closing costs and your mortgage amount, breakeven will be 6 to 18 months on the refinance. You get a guaranteed rate now with the option to move down if the opportunity arises.
aerosurfer
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by aerosurfer »

Did you check on a 20 year fix rate? I found it was a nice gap in principle pay down and cheaper payment compared to the 15year. But the rate we got 2 years ago was close to the 15 rate than 30
bloom2708
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by bloom2708 »

Also look at 7/1 and 10/1 ARM rates.

You may be able to get a better rate and you most likely won't have that mortgage for 7 or 10 years.
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BradJ
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by BradJ »

Thorsbane wrote: Mon Jul 01, 2019 1:30 pm
ResearchMed wrote: Mon Jul 01, 2019 1:13 pm
Hanksmoney wrote: Mon Jul 01, 2019 1:07 pm I'm not a fan of 30 year mortgages after I started with one in 2009 at 4.875%. I refinance 3 years ago to a 15 at 3.7%. I gently warm my friends against them b/c of the low ratio of principle to interest you pay during the first 10 years. That principle barely budges.

Just about rate - 3.875% is a fine rate.
One could always pay more, perhaps the monthly amount that would have been required for a 15 year mortgage (or more, or less), IF one wishes to pay the mortgage earlier.
There would be a slight cost of the slightly higher rate, but this method would allow one to switch back to the 30 year required payments (lower than the 15 year payments) if necessary.

RM
I think this is a key point commonly missed on BH. Cash flow flexibility is imperative. It allows a household to choose from many levers when in financial distress. Personally, 15 year would have been a great choice when I first bought my house, but now being 5 years in and about to have a second kid, I'm not sure how we would do it. Life changes, be ready!
I second this notion. If personal finance is an interest of yours, I am confident you would throw more money down on the home if it were available. I cut my mortgage cost and years in half about two years ago to achieve some family goals, but that came at living in a fixxer upper. Looking back, I would have kept my 30 year mortgage and paid extra when I could.
Jags4186
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by Jags4186 »

IndexFun wrote: Mon Jul 01, 2019 12:45 pm Hello Bogleheads!

We are set to close on a new house on August 7th and can lock in a 30y rate at 3.875% with a standard 20% down.

I am tempted to hold out to see if rates fall further if the bond rally continues, but on the other hand, know that I nor anyone can predict that with any accuracy. I think mentally I would feel worse if the rate ticked up 20bps to 4.075% versus falling 20bps to 3.675% just because of the mental 4% threshold; so I should probably minimize regret and lock in rates.

Am I thinking about this the right way, should I just lock it in and move on?

Thanks in advance!
There is no reason not to lock your rate. If rates fall your lender can either float down or you can just go get a new lender at the new lower rate. Locking in means your rate won’t go any higher. It doesn’t mean your stuck at that rate or committed to that lender or loan.
mortfree
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by mortfree »

I got a 3.875% for a 30-year mortgage in November 2017.

Now if I want to refinance I will have to pay about $3600 in closing costs. I am considering a 15 year at 3.125% but payment would be $350 more if I keep the loan amount the same as is now.

I know some people seem to have a way to refinance without costs but I haven’t figured that out.
John Doe 123
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by John Doe 123 »

I am in the process of refinancing to a 30 year @ 3.625 for no cost.

You can almost certainly do better than 3.875% if you go through a private brokerage instead of using a bank or credit union.

I wish I figured this out years ago, it would have saved me thousands.
megabad
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by megabad »

John Doe 123 wrote: Mon Jul 01, 2019 2:37 pm I am in the process of refinancing to a 30 year @ 3.625 for no cost.

You can almost certainly do better than 3.875% if you go through a private brokerage instead of using a bank or credit union.

I wish I figured this out years ago, it would have saved me thousands.
This. I am seeing 3.5-3.7% interest as the going rate now. So 3.875% interest is not particularly attractive unless they have an incentive. Make sure you shop. Although I don't agree that brokers are that useful (going to direct to the lender has always been cheapest for me by far).
John Doe 123
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by John Doe 123 »

megabad wrote: Mon Jul 01, 2019 2:51 pm
John Doe 123 wrote: Mon Jul 01, 2019 2:37 pm I am in the process of refinancing to a 30 year @ 3.625 for no cost.

You can almost certainly do better than 3.875% if you go through a private brokerage instead of using a bank or credit union.

I wish I figured this out years ago, it would have saved me thousands.
This. I am seeing 3.5-3.7% interest as the going rate now. So 3.875% interest is not particularly attractive unless they have an incentive. Make sure you shop. Although I don't agree that brokers are that useful (going to direct to the lender has always been cheapest for me by far).
I went to around directly to about a dozen lenders in my area and scoured bankrate.com for weeks. The best I could find was 3.75% for a 30 year loan and that had $1500 closing costs.

A coworker clued me into a private broker that he has used for a couple rounds of financing. I was offered 3.375% if I wanted to pay ~$2000 closing costs, or 3.625 with a lender credit that covered all costs. My hope is that rates will continue to fall and I'll just keep doing no-cost refi's instead of trying to catch a falling knife.

I know it's just one data point, but in my experience the broker was much better than directly contacting lenders.
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batpot
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by batpot »

Thorsbane wrote: Mon Jul 01, 2019 1:30 pm
ResearchMed wrote: Mon Jul 01, 2019 1:13 pm
Hanksmoney wrote: Mon Jul 01, 2019 1:07 pm I'm not a fan of 30 year mortgages after I started with one in 2009 at 4.875%. I refinance 3 years ago to a 15 at 3.7%. I gently warm my friends against them b/c of the low ratio of principle to interest you pay during the first 10 years. That principle barely budges.

Just about rate - 3.875% is a fine rate.
One could always pay more, perhaps the monthly amount that would have been required for a 15 year mortgage (or more, or less), IF one wishes to pay the mortgage earlier.
There would be a slight cost of the slightly higher rate, but this method would allow one to switch back to the 30 year required payments (lower than the 15 year payments) if necessary.

RM
I think this is a key point commonly missed on BH. Cash flow flexibility is imperative. It allows a household to choose from many levers when in financial distress. Personally, 15 year would have been a great choice when I first bought my house, but now being 5 years in and about to have a second kid, I'm not sure how we would do it. Life changes, be ready!
+1.

If you get a 30 year fixed and pay additional to equal the amount the 15 year fixed would force you to pay every month, it will be paid down in ~16-17 years. So yes, you're making 1-2 more years of payments, but you have so much more flexibility. Simple risk reduction.
Jags4186
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by Jags4186 »

megabad wrote: Mon Jul 01, 2019 2:51 pm
John Doe 123 wrote: Mon Jul 01, 2019 2:37 pm I am in the process of refinancing to a 30 year @ 3.625 for no cost.

You can almost certainly do better than 3.875% if you go through a private brokerage instead of using a bank or credit union.

I wish I figured this out years ago, it would have saved me thousands.
This. I am seeing 3.5-3.7% interest as the going rate now. So 3.875% interest is not particularly attractive unless they have an incentive. Make sure you shop. Although I don't agree that brokers are that useful (going to direct to the lender has always been cheapest for me by far).
Unless you have a relationship bonus (say having $1,000,000 at a bank or whatever), 3.875% is the current best no cost refinance option—(I actually got about $400 back from the deal). I just closed on this within the last two weeks. I don’t think it makes sense to pay to refinance right now given that there’s a pretty good chance rates are going to stay where they are or lower even more. Of course nothing in life is a sure thing, but it’s a bet I’m willing to make.
Jags4186
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by Jags4186 »

mortfree wrote: Mon Jul 01, 2019 2:16 pm I got a 3.875% for a 30-year mortgage in November 2017.

Now if I want to refinance I will have to pay about $3600 in closing costs. I am considering a 15 year at 3.125% but payment would be $350 more if I keep the loan amount the same as is now.

I know some people seem to have a way to refinance without costs but I haven’t figured that out.
You have a no cost refinance by essentially having negative points.

So for example:

You might have a 3.875% loan with $2200 in closing fees (ignoring escrow/prepaid interest) and receive a $2200 lender credit

Or you could have

3.75% with $2200 in closing fees and receive a smaller or no lender credit

Or you could have

3.625% by paying $2200 in closing fees + the cost of points
megabad
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by megabad »

Jags4186 wrote: Mon Jul 01, 2019 3:38 pm Unless you have a relationship bonus (say having $1,000,000 at a bank or whatever), 3.875% is the current best no cost refinance option
I suppose you may be right, but why is a "no-cost" refinance any better than any other mortgage? A quick search on bankrate.com shows 3.625% with $100 fee. My local credit union is 3.5% with no points (and a small fee ~$400). These would be made up quickly on an average loan amount. On a $300k loan this is something like a year to pay back and then you have a lower interest rate for 30 years (or however long you keep mortgage). I don't see the point of valuing a "no cost" refi any differently than any other stream of cash flows unless you refi every year.
Jags4186
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by Jags4186 »

megabad wrote: Mon Jul 01, 2019 4:35 pm
Jags4186 wrote: Mon Jul 01, 2019 3:38 pm Unless you have a relationship bonus (say having $1,000,000 at a bank or whatever), 3.875% is the current best no cost refinance option
I suppose you may be right, but why is a "no-cost" refinance any better than any other mortgage? A quick search on bankrate.com shows 3.625% with $100 fee. My local credit union is 3.5% with no points (and a small fee ~$400). These would be made up quickly on an average loan amount. On a $300k loan this is something like a year to pay back and then you have a lower interest rate for 30 years (or however long you keep mortgage). I don't see the point of valuing a "no cost" refi any differently than any other stream of cash flows unless you refi every year.
There are lender fees and then there are other fees which aren’t lender fees but regardless you’re responsible for paying

Title insurance
Recording fees
Appraisal
Prepaid interest

These can easily come to a few $1000 just to obtain the loan.

A true “no cost” refinance means you don’t assume any of these costs in order to obtain the loan. In a declining interest environment you can repeatedly refinance when it doesn’t cost you anything to do so. Not so if you you’re paying a few $1000 for the privilege. And of course, from a cash flow perspective it’s better not to pull anything out of your pocket.

Here is an example of the refinance I just did.

3.875% where I ended up getting $400 back due to the credit
3.75% where I’d have to pay about $1000

Difference in payment between 3.875 and 3.75 was $22/mo. So there was a >5 year payback for me to do the 3.75% vs the 3.875% no cost.
megabad
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by megabad »

Jags4186 wrote: Mon Jul 01, 2019 4:43 pm A true “no cost” refinance means you don’t assume any of these costs in order to obtain the loan. In a declining interest environment you can repeatedly refinance when it doesn’t cost you anything to do so. Not so if you you’re paying a few $1000 for the privilege.
I guess you are just more of gambler than me. I would rather take the guaranteed lower rate than hope for another decline, especially given the very quick payback period for those fees. In my area, the costs for a typical 300k loan would be something like 700 lenders title, 300 in recording, 400 in appraisal. The payback period is minimal (2-3 years tops). As I said, I don't see the point, because I wouldn't take that gamble. By taking the lower rate, you pay a little more up front and recoup the losses in 2 years and still retain the possibility to refi if rates dip. With the higher rate "no-cost" option, if you predict wrong, you continue to lose for 30 years. If you are right, you have saved no more than $1400 for taking this risk. With the lower rate option, in the first 10 years, you will save over $5,000 in interest.
Jags4186
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by Jags4186 »

megabad wrote: Mon Jul 01, 2019 5:14 pm
Jags4186 wrote: Mon Jul 01, 2019 4:43 pm A true “no cost” refinance means you don’t assume any of these costs in order to obtain the loan. In a declining interest environment you can repeatedly refinance when it doesn’t cost you anything to do so. Not so if you you’re paying a few $1000 for the privilege.
I guess you are just more of gambler than me. I would rather take the guaranteed lower rate than hope for another decline, especially given the very quick payback period for those fees. In my area, the costs for a typical 300k loan would be something like 700 lenders title, 300 in recording, 400 in appraisal. The payback period is minimal (2-3 years tops). As I said, I don't see the point, because I wouldn't take that gamble. By taking the lower rate, you pay a little more up front and recoup the losses in 2 years and still retain the possibility to refi if rates dip. With the higher rate "no-cost" option, if you predict wrong, you continue to lose for 30 years. If you are right, you have saved no more than $1400 for taking this risk. With the lower rate option, in the first 10 years, you will save over $5,000 in interest.
OK so using your numbers:

$300k loan at 3.875% and no fees = $1411/mo payment
$300k loan at 3.75% with the following fees: $400 lender fee, $700 Title, $300 Recording, $400 Appraisal = $1800. Payment = $1389

$1800 / $22 = 82 month payback so that is a nearly 7 year payback

I’d rather have the $1800 in my pocket today than wait for it to start paying me back 7 years from now. And if rates continue to drop, I can again refinance whereas you would need to crunch some numbers to decide whether its worth it or not.
megabad
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by megabad »

Jags4186 wrote: Mon Jul 01, 2019 5:19 pm $300k loan at 3.875% and no fees = $1411/mo payment
$300k loan at 3.75% with the following fees: $400 lender fee, $700 Title, $300 Recording, $400 Appraisal = $1800. Payment = $1389

$1800 / $22 = 82 month payback so that is a nearly 7 year payback

I’d rather have the $1800 in my pocket today than wait for it to start paying me back 7 years from now. And if rates continue to drop, I can again refinance whereas you would need to crunch some numbers to decide whether its worth it or not.
The lowest bankrate interest I saw was 3.625% (feel free to lookup yourself). On 300k loan that is 1368 per month. 3.875% is $1411 per month. $43/month savings. The payback is less than 3 years. Like I said, if you are a gambler and you are certain rates will drop, than go for it, but seems like a pretty high rate to me.
Jags4186
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by Jags4186 »

megabad wrote: Mon Jul 01, 2019 5:39 pm
Jags4186 wrote: Mon Jul 01, 2019 5:19 pm $300k loan at 3.875% and no fees = $1411/mo payment
$300k loan at 3.75% with the following fees: $400 lender fee, $700 Title, $300 Recording, $400 Appraisal = $1800. Payment = $1389

$1800 / $22 = 82 month payback so that is a nearly 7 year payback

I’d rather have the $1800 in my pocket today than wait for it to start paying me back 7 years from now. And if rates continue to drop, I can again refinance whereas you would need to crunch some numbers to decide whether its worth it or not.
The lowest bankrate interest I saw was 3.625% (feel free to lookup yourself). On 300k loan that is 1368 per month. 3.875% is $1411 per month. $43/month savings. The payback is less than 3 years. Like I said, if you are a gambler and you are certain rates will drop, than go for it, but seems like a pretty high rate to me.
Yes, I recommend you reach out to who you see on bankrate to get a loan estimate so you can compare apples to apples. Cheers. :sharebeer
Eurookat
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by Eurookat »

I locked my 30yr at 3.75 a week ago. I'm seeing 3.625 now, shame but whatever I'm happy.
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AerialWombat
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by AerialWombat »

I refinanced two months ago at 4%. Now I’m saying, “D’oh!” But whatever, 4 is better than 4.75.

So don’t stress too much over it, I’d say.
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willthrill81
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by willthrill81 »

ResearchMed wrote: Mon Jul 01, 2019 1:13 pm
Hanksmoney wrote: Mon Jul 01, 2019 1:07 pm I'm not a fan of 30 year mortgages after I started with one in 2009 at 4.875%. I refinance 3 years ago to a 15 at 3.7%. I gently warm my friends against them b/c of the low ratio of principle to interest you pay during the first 10 years. That principle barely budges.

Just about rate - 3.875% is a fine rate.
One could always pay more, perhaps the monthly amount that would have been required for a 15 year mortgage (or more, or less), IF one wishes to pay the mortgage earlier.
There would be a slight cost of the slightly higher rate, but this method would allow one to switch back to the 30 year required payments (lower than the 15 year payments) if necessary.

RM
A better move is probably to build up one's EF to the point that the 15 year mortgage can be paid for a sufficiently lengthy period. The 'pay off a 30 year mortgage in 15 years' is actually a fairly expensive option, IMHO.
willthrill81 wrote: Sun Jun 16, 2019 10:23 pm According to BankRate.com, the average 30 year mortgage rate is currently 3.92%, and the average 15 year mortgage rate is 3.23%. At these rates, the difference in total interest paid between paying off a 30 year mortgage in 15 years vs. paying off the 15 year mortgage in 15 years is $6,118.20 per $100k borrowed. That's significantly less than it was earlier in the year, but it still seems like a hefty price to pay for flexibility that can largely be 'bought' with a higher EF.
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willthrill81
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by willthrill81 »

alfaspider wrote: Mon Jul 01, 2019 1:31 pmWith the flat yield curve, the 15 does not provide all that much of an interest discount. You'd only pay slightly more by taking a 30 year and paying an additional amount towards principal equal to the 15 year amortization.
According to FRED, the spread between a 30 year and 15 year mortgage is currently .64%. That's an additional $640 in annual interest for every $100k borrowed. Whether that qualifies as "all that much" is a matter of opinion, but I'd call that significant.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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F150HD
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by F150HD »

Hanksmoney wrote: Mon Jul 01, 2019 1:07 pm I'm not a fan of 30 year mortgages after I started with one in 2009 at 4.875%. I refinance 3 years ago to a 15 at 3.7%. I gently warm my friends against them b/c of the low ratio of principle to interest you pay during the first 10 years. That principle barely budges.

Just about rate - 3.875% is a fine rate.
some suggest taking a 30 year for the protection it offers (lower payment in the event of a job loss etc, its been discussed here in multiple threads). Also, one can easily pay additional principle on a 30 year and reduce the term.

Edit- I see multiple people stated this same thing above. Flexibility is good.
Long is the way and hard, that out of Hell leads up to light.
BlueCable
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by BlueCable »

I'm refinancing a 15yr from 4% to 2.875% right now. We've only had this loan 6 months.

Rates might go lower, but rates are almost to historical lows. If things get wacky and drop to 2.25%, I'd do another refinance, which would breakeven in two years.
Bacchus01
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by Bacchus01 »

megabad wrote: Mon Jul 01, 2019 5:39 pm
Jags4186 wrote: Mon Jul 01, 2019 5:19 pm $300k loan at 3.875% and no fees = $1411/mo payment
$300k loan at 3.75% with the following fees: $400 lender fee, $700 Title, $300 Recording, $400 Appraisal = $1800. Payment = $1389

$1800 / $22 = 82 month payback so that is a nearly 7 year payback

I’d rather have the $1800 in my pocket today than wait for it to start paying me back 7 years from now. And if rates continue to drop, I can again refinance whereas you would need to crunch some numbers to decide whether its worth it or not.
The lowest bankrate interest I saw was 3.625% (feel free to lookup yourself). On 300k loan that is 1368 per month. 3.875% is $1411 per month. $43/month savings. The payback is less than 3 years. Like I said, if you are a gambler and you are certain rates will drop, than go for it, but seems like a pretty high rate to me.
You guys are calculating this wrong. You should look at the interest difference, not the full payment.
Bacchus01
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by Bacchus01 »

BlueCable wrote: Tue Jul 02, 2019 5:47 am I'm refinancing a 15yr from 4% to 2.875% right now. We've only had this loan 6 months.

Rates might go lower, but rates are almost to historical lows. If things get wacky and drop to 2.25%, I'd do another refinance, which would breakeven in two years.
Where are you getting a rate like that? I’d refi at that rate from my current 3.25%

I have a second home at 2.5% for 15. I don’t think I’ll ever beat that!
260chrisb
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by 260chrisb »

Lock it in and move on.
Nowizard
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by Nowizard »

The 52 week averages are at 3.79 and 5.05, low and high for a 30-year fixed-rate mortgage. We recently took out a 3.625 on a 15-year mortgage. Sure, you might squeeze out a few more basis points, but points and fees might be a more significant factor in terms of actual rate changes. Either way, you are dealing with what has been a historically low period of mortgage rates. Why push your luck? Generally, we have used 30-year mortgages even though we could have done 15-year. Yes, more interest payment but more liquidity as well. With new tax laws, whether you itemize is a factor, as is the amount of the loan and deductible interest that lowers your actual interest rate further.

Tim
LordB
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by LordB »

We got 3.85 with 30 year or 2.99 with 15 year. This is a condo with 20% down and very well qualified (mortgage broker said we had double the income needed).

I too am curious if that is possible to beat somewhere (2.85 would obviously be better, but that rate may be house only not condo or a jumbo loan which ours also is not), but I think I am probably too far in to switch at this point.

I did a bunch of shopping beforehand to find this, but the best rate ended up being the broker that the realtor recommended. Ours was through rate.com if anyone really wants the exact broker on there feel free to message. (I don't think saying this is against the rules, but if so apologies to the mods). We checked DCU, bank of america actually filling out the forms and checked a bunch of others based on their online rates listed.

Bank of america was annoying asking for a bunch of additional info that neither of the others asked for and were eliminated based on that even though they had similar rates as the broker we went with. It was obvious they were going to be a PITA to deal with. DCU's rates/fees were not competitive though they were very easy to work with and them being local could have been handy, but the money was different enough and the rate.com broker was very helpful as well so we decided local wasn't worth the extra cost.

We ended up going with the 15 year mortgage at 2.99. It is possible the 30 year would have gone down a bit as we didn't have him do a final estimage with it as we had decided to go with the 15 year. I believe the rates dropped slightly in that time.
gf_merv
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by gf_merv »

I just locked about 2 weeks ago at 3.375% on a 30 year refinance, no points. I think you can find lower than 3.875%
Jags4186
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by Jags4186 »

gf_merv wrote: Tue Jul 02, 2019 8:18 am I just locked about 2 weeks ago at 3.375% on a 30 year refinance, no points. I think you can find lower than 3.875%
Where and what relationship do you have with that institution?

I don’t believe 3.375% is publicly available with no points.

You can definitely do better than 3.875% on the open market, I simply was pointing out that at 3.875% it shouldn’t be costing you a penny out of your pocket. You may be able to do 3.75% no cost today—not 100% sure. I need to sit for a few months before I start exploring again.
alfaspider
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by alfaspider »

willthrill81 wrote: Mon Jul 01, 2019 11:04 pm
alfaspider wrote: Mon Jul 01, 2019 1:31 pmWith the flat yield curve, the 15 does not provide all that much of an interest discount. You'd only pay slightly more by taking a 30 year and paying an additional amount towards principal equal to the 15 year amortization.
According to FRED, the spread between a 30 year and 15 year mortgage is currently .64%. That's an additional $640 in annual interest for every $100k borrowed. Whether that qualifies as "all that much" is a matter of opinion, but I'd call that significant.
The difference used to be well over 1%. As for the difference, it may vary based on location and mortgage type (VA/FHA/Conforming/Jumbo/Super Jumbo). I was quoted 3.875 for a 30 year vs. 3.45 for a 15 for a jumbo in Texas a few weeks ago. According to this site, the delta is currently only .2%:

http://www.mortgagenewsdaily.com/mortga ... daily.aspx

That additional interest seems relatively insignificant against investment returns that might be in the 6-10% range, with the added benefit of additional liquidity.
ERISA Stone
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by ERISA Stone »

2.69% on a 15 year note at Delta Community. https://www.deltacommunitycu.com/home/f ... rates.aspx
ERISA Stone
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by ERISA Stone »

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willthrill81
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by willthrill81 »

alfaspider wrote: Tue Jul 02, 2019 8:54 am
willthrill81 wrote: Mon Jul 01, 2019 11:04 pm
alfaspider wrote: Mon Jul 01, 2019 1:31 pmWith the flat yield curve, the 15 does not provide all that much of an interest discount. You'd only pay slightly more by taking a 30 year and paying an additional amount towards principal equal to the 15 year amortization.
According to FRED, the spread between a 30 year and 15 year mortgage is currently .64%. That's an additional $640 in annual interest for every $100k borrowed. Whether that qualifies as "all that much" is a matter of opinion, but I'd call that significant.
The difference used to be well over 1%. As for the difference, it may vary based on location and mortgage type (VA/FHA/Conforming/Jumbo/Super Jumbo). I was quoted 3.875 for a 30 year vs. 3.45 for a 15 for a jumbo in Texas a few weeks ago. According to this site, the delta is currently only .2%:

http://www.mortgagenewsdaily.com/mortga ... daily.aspx

That additional interest seems relatively insignificant against investment returns that might be in the 6-10% range, with the added benefit of additional liquidity.
You can do a lot better than 3.63% on a 15 year mortgage right now. FRED reports the average 15 year rate to currently be 3.16%.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
alfaspider
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by alfaspider »

willthrill81 wrote: Tue Jul 02, 2019 10:06 am
alfaspider wrote: Tue Jul 02, 2019 8:54 am
willthrill81 wrote: Mon Jul 01, 2019 11:04 pm
alfaspider wrote: Mon Jul 01, 2019 1:31 pmWith the flat yield curve, the 15 does not provide all that much of an interest discount. You'd only pay slightly more by taking a 30 year and paying an additional amount towards principal equal to the 15 year amortization.
According to FRED, the spread between a 30 year and 15 year mortgage is currently .64%. That's an additional $640 in annual interest for every $100k borrowed. Whether that qualifies as "all that much" is a matter of opinion, but I'd call that significant.
The difference used to be well over 1%. As for the difference, it may vary based on location and mortgage type (VA/FHA/Conforming/Jumbo/Super Jumbo). I was quoted 3.875 for a 30 year vs. 3.45 for a 15 for a jumbo in Texas a few weeks ago. According to this site, the delta is currently only .2%:

http://www.mortgagenewsdaily.com/mortga ... daily.aspx

That additional interest seems relatively insignificant against investment returns that might be in the 6-10% range, with the added benefit of additional liquidity.
You can do a lot better than 3.63% on a 15 year mortgage right now. FRED reports the average 15 year rate to currently be 3.16%.
Again, location and type matters. The FRED numbers are averages and are mostly conforming loans. I'm pricing a jumbo. Mortgage News Daily is a much better representation what you can actually realistically expect to pay.
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willthrill81
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by willthrill81 »

alfaspider wrote: Tue Jul 02, 2019 10:45 am
willthrill81 wrote: Tue Jul 02, 2019 10:06 am
alfaspider wrote: Tue Jul 02, 2019 8:54 am
willthrill81 wrote: Mon Jul 01, 2019 11:04 pm
alfaspider wrote: Mon Jul 01, 2019 1:31 pmWith the flat yield curve, the 15 does not provide all that much of an interest discount. You'd only pay slightly more by taking a 30 year and paying an additional amount towards principal equal to the 15 year amortization.
According to FRED, the spread between a 30 year and 15 year mortgage is currently .64%. That's an additional $640 in annual interest for every $100k borrowed. Whether that qualifies as "all that much" is a matter of opinion, but I'd call that significant.
The difference used to be well over 1%. As for the difference, it may vary based on location and mortgage type (VA/FHA/Conforming/Jumbo/Super Jumbo). I was quoted 3.875 for a 30 year vs. 3.45 for a 15 for a jumbo in Texas a few weeks ago. According to this site, the delta is currently only .2%:

http://www.mortgagenewsdaily.com/mortga ... daily.aspx

That additional interest seems relatively insignificant against investment returns that might be in the 6-10% range, with the added benefit of additional liquidity.
You can do a lot better than 3.63% on a 15 year mortgage right now. FRED reports the average 15 year rate to currently be 3.16%.
Again, location and type matters. The FRED numbers are averages and are mostly conforming loans. I'm pricing a jumbo. Mortgage News Daily is a much better representation what you can actually realistically expect to pay.
The link ERISA Stone provided above quotes 2.875% for a 15 year jumbo mortgage.

Yes, location matters, but 3.63% for a 15 year mortgage is far too high to be competitive these days.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
4th and Inches
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by 4th and Inches »

Great information in here. I have been looking quite a bit lately for something that is truly no-cost, nothing out-of-pocket and don't fee like I can beat my 3.875% rate with $384,000 remaining as things stand currently. I don't want to chip in even $2,000 just to get to 3.75%. I also don't think the transfer of funds to get a relationship discount is a viable option either since I don't have $500k-1 million in assets to move. A few people seem to have alluded to being able to beat 3.875%, but I have not seen who they are getting their quotes from.

Share where you can get a 30-year mortgage better than what I am seeing!
gf_merv
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by gf_merv »

Jags4186 wrote: Tue Jul 02, 2019 8:33 am
gf_merv wrote: Tue Jul 02, 2019 8:18 am I just locked about 2 weeks ago at 3.375% on a 30 year refinance, no points. I think you can find lower than 3.875%
Where and what relationship do you have with that institution?

I don’t believe 3.375% is publicly available with no points.

You can definitely do better than 3.875% on the open market, I simply was pointing out that at 3.875% it shouldn’t be costing you a penny out of your pocket. You may be able to do 3.75% no cost today—not 100% sure. I need to sit for a few months before I start exploring again.
TD Bank and no relationship. Their website said 3.5%, so I called the number on the website and the representative ran the numbers and said the rate I can get is 3.375%. I locked the rate on the spot since I had seen 3.5% a few places but nowhere did I see below 3.5% for refinance, only for new purchases.
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batpot
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by batpot »

just found a 30 year fixed with $1 in closing at 3.5% with a Seattle zip.

I've had good luck with Zillow and Bankrate lenders.
alfaspider
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by alfaspider »

willthrill81 wrote: Tue Jul 02, 2019 11:19 am
alfaspider wrote: Tue Jul 02, 2019 10:45 am
willthrill81 wrote: Tue Jul 02, 2019 10:06 am
alfaspider wrote: Tue Jul 02, 2019 8:54 am
willthrill81 wrote: Mon Jul 01, 2019 11:04 pm

According to FRED, the spread between a 30 year and 15 year mortgage is currently .64%. That's an additional $640 in annual interest for every $100k borrowed. Whether that qualifies as "all that much" is a matter of opinion, but I'd call that significant.
The difference used to be well over 1%. As for the difference, it may vary based on location and mortgage type (VA/FHA/Conforming/Jumbo/Super Jumbo). I was quoted 3.875 for a 30 year vs. 3.45 for a 15 for a jumbo in Texas a few weeks ago. According to this site, the delta is currently only .2%:

http://www.mortgagenewsdaily.com/mortga ... daily.aspx

That additional interest seems relatively insignificant against investment returns that might be in the 6-10% range, with the added benefit of additional liquidity.
You can do a lot better than 3.63% on a 15 year mortgage right now. FRED reports the average 15 year rate to currently be 3.16%.
Again, location and type matters. The FRED numbers are averages and are mostly conforming loans. I'm pricing a jumbo. Mortgage News Daily is a much better representation what you can actually realistically expect to pay.
The link ERISA Stone provided above quotes 2.875% for a 15 year jumbo mortgage.

Yes, location matters, but 3.63% for a 15 year mortgage is far too high to be competitive these days.
I should also note that I'm citing APR, and you are citing base rate. I got quotes before the fed meeting, and there has been some drop since then- I'm waiting until we are in the 30 day window to lock. The Delta Community link shows 3.45 APR for a 30 year fixed jumbo or 3.01 for a 15 year. Either way, .4% or so it not personally significant enough to me to forego the cash flow benefits of the 30.
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IndexFun
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by IndexFun »

Thanks for all the valuable feedback!

I agree in principle with the 30-year for flexibility and can pay down much earlier over time as cash flow allows.

I checked with BB&T, BOA (where we have platinum honors rewards status with money at Merril Edge), Costco Mortgage Program and 2 local mortgage brokers.

Best total rate/cost I got today was from First Choice, a Costco program lender:

3.625%, no origination fee ($275 waived); no third party fees ($219 credit); only responsible for $450 appraisal and attorney/title cost (same with all lenders).
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willthrill81
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by willthrill81 »

IndexFun wrote: Tue Jul 02, 2019 3:21 pm I agree in principle with the 30-year for flexibility and can pay down much earlier over time as cash flow allows.
Before you do so, I humbly ask you to read this thread on that specific topic.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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ResearchMed
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Re: Lock in 30y Mortgage Rate at 3.875%?

Post by ResearchMed »

willthrill81 wrote: Tue Jul 02, 2019 3:27 pm
IndexFun wrote: Tue Jul 02, 2019 3:21 pm I agree in principle with the 30-year for flexibility and can pay down much earlier over time as cash flow allows.
Before you do so, I humbly ask you to read this thread on that specific topic.
Your first post in that thread starts with:

"This post does not address the value in paying off a mortgage early but rather the choice to specifically take out a 30 year mortgage when one intends to pay it off in 15 years..."
[emphasis added]

I think most of us would agree with this.

However, the issue being discussed right here (and in my post above) is NOT the same thing.
It is "specifically* to have the flexibility NOT to pay the higher 15-year monthly payments if the cash flow works better, especially if unexpected financial difficulties arise.

If one has no reason to worry that finances would make the 15 year monthly payments a problem, then sure, don't take out a 30 year mortgage to start with. But this isn't the situation under consideration in this particular case.

There can be a LOT of "Sleep Well At Night" value in knowing that one could cut back in mortgage payments, without risking the house.
Obviously, there could be other budget adjustments, but this is an easy one.
The primary goal isn't to pay it back in 15 years, but to make extra payments when possible, to pay the mortgage off sooner, and thus pay less in interest over the years, due to the years where no more is owed. That plus the satisfaction of having paid off the mortgage in less than 30 years!

RM
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