Ethical Dilemna - Rate Lock Woes

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Locked
Topic Author
cubaboymatt1316
Posts: 106
Joined: Tue Feb 28, 2012 8:59 am

Ethical Dilemna - Rate Lock Woes

Post by cubaboymatt1316 »

[Removed]

Thanks for all the help!
Last edited by cubaboymatt1316 on Sat Jul 11, 2020 5:53 am, edited 1 time in total.
HomeStretch
Posts: 4991
Joined: Thu Dec 27, 2018 3:06 pm

Re: Ethical Dilemna - Rate Lock Woes

Post by HomeStretch »

It’s business, not personal. Go with the lender that gives you the best deal. But a 7-year payback at Lender #2 seems too long.
jimmyrules712
Posts: 587
Joined: Thu Jan 06, 2011 11:36 pm

Re: Ethical Dilemna - Rate Lock Woes

Post by jimmyrules712 »

I'm not sure a .5% rate reduction is worth $7k in extra costs for the loan. If you're going to go through the trouble to get a better deal make sure it's worth the trouble.
User avatar
Stinky
Posts: 5567
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: Ethical Dilemna - Rate Lock Woes

Post by Stinky »

I’d take a $300k loan at 2.75% with no closing costs over one at 2.25% with $7k closing costs. Payback on added closing costs is too long.

So I’d stick with original deal.
It's a GREAT day to be alive - Travis Tritt
Topic Author
cubaboymatt1316
Posts: 106
Joined: Tue Feb 28, 2012 8:59 am

Re: Ethical Dilemna - Rate Lock Woes

Post by cubaboymatt1316 »

HomeStretch wrote: Fri Jul 10, 2020 9:49 pm It’s business, not personal. Go with the lender that gives you the best deal. But a 7-year payback at Lender #2 seems too long.
I agree it’s a long break-even period. Goes back to the builder not giving any closing costs unless I choose their preferred lender.
28fe6
Posts: 532
Joined: Wed Jan 03, 2018 9:01 am

Re: Ethical Dilemna - Rate Lock Woes

Post by 28fe6 »

Payback is too long to switch. Take the first loan. If rates really drop, refi later. There's no sense in switching for such a small difference.
User avatar
anon_investor
Posts: 3527
Joined: Mon Jun 03, 2019 1:43 pm

Re: Ethical Dilemna - Rate Lock Woes

Post by anon_investor »

28fe6 wrote: Fri Jul 10, 2020 10:28 pm Payback is too long to switch. Take the first loan. If rates really drop, refi later. There's no sense in switching for such a small difference.
+1.
bampf
Posts: 590
Joined: Thu Aug 04, 2016 6:19 pm

Re: Ethical Dilemna - Rate Lock Woes

Post by bampf »

I don't think it is an ethical dilemma. Rates are lower. I guess you need to ask yourself how much 21K matters to you. A half point aint nothing. If I were doing the deal I would ask them to meet you half way or tell them you have a loan for 2.25 in your back pocket. That being said, if you pay off the loan early, it changes everything. Take the $7K in closing costs an immediately pay down the principle. That $7K translates to $13K less interest over the life of the loan. If you pay $15K upfront you are break even for the life of the loan.$555K vs $530K.

I don't know your cash flow, down payment of income. So, hard to judge. In general you can minimize interest by not paying it. You can also refi nearly immediately generally for faily low $. Maybe you close, shop around and bag a 2% 15 year loan. Lot of options here. That being said, over a year you are talking about a delta of ~$1. Maybe invest the $7k in a 10 bagger and make so much money you don't care.

Lot of words to say its just business. Is what it is.

--Bampf
User avatar
BrandonBogle
Posts: 3295
Joined: Mon Jan 28, 2013 11:19 pm

Re: Ethical Dilemna - Rate Lock Woes

Post by BrandonBogle »

Thank you for your service Matt. You don’t mention if you qualify for a waived VA funding fee. If you do, just use the preferred lender for 2.75% and refinance elsewhere in a few weeks/months.

If you have to pay the VA funding fee, then look into what the costs for a IRRRL refi are. You may fine 2.25% without $7k in closing costs.

However, just a side note. Make sure you are thinking about real closing costs vs. what the paperwork says are loan costs. For instance, if you have an escrow account, don’t count that as part of your “closing costs” when refinancing. That is your money saved to pay for taxes and insurance. If you refi, the prior lender sends you a check for it about two weeks later. So even though it may show up as a “closing cost”, it really isn’t. The VA funding fee and escrow funding/prepaids could explain much of that $7k and thus, taking the 2.75% and refinancing may be far cheaper than $7k.
Topic Author
cubaboymatt1316
Posts: 106
Joined: Tue Feb 28, 2012 8:59 am

Re: Ethical Dilemna - Rate Lock Woes

Post by cubaboymatt1316 »

BrandonBogle wrote: Sat Jul 11, 2020 12:27 am You don’t mention if you qualify for a waived VA funding fee.
....

However, just a side note. Make sure you are thinking about real closing costs vs. what the paperwork says are loan costs.
Thank you for all the responses. It’s put my mind at ease a bit.

I qualify for no funding fee.

7k includes prepaids, but Lender 1, the builder’s preferred, has the builder paying everything so I come to closing with nothing. Lender 2 has me coming to closing with all $7k because the builder will withdraw all incentives. That was told to me before I ever signed the contract.

To answer some other Qs:

- I have plenty of cash, about $70k, but plan on using that to build a pool on the new property (not quite all of the $70k, keeping a suitable EF). Retaining $7k would be nice, but ~$80/month reduction in payment is nice too.

- there’s a 210 day/6 payment waiting period to refinance with VA. So refinancing sooner would require a conventional refinance.
qwertyjazz
Posts: 1224
Joined: Tue Feb 23, 2016 4:24 am

Re: Ethical Dilemna - Rate Lock Woes

Post by qwertyjazz »

cubaboymatt1316 wrote: Sat Jul 11, 2020 4:20 am
BrandonBogle wrote: Sat Jul 11, 2020 12:27 am You don’t mention if you qualify for a waived VA funding fee.
....

However, just a side note. Make sure you are thinking about real closing costs vs. what the paperwork says are loan costs.
Thank you for all the responses. It’s put my mind at ease a bit.

I qualify for no funding fee.

7k includes prepaids, but Lender 1, the builder’s preferred, has the builder paying everything so I come to closing with nothing. Lender 2 has me coming to closing with all $7k because the builder will withdraw all incentives. That was told to me before I ever signed the contract.

To answer some other Qs:

- I have plenty of cash, about $70k, but plan on using that to build a pool on the new property (not quite all of the $70k, keeping a suitable EF). Retaining $7k would be nice, but ~$80/month reduction in payment is nice too.

- there’s a 210 day/6 payment waiting period to refinance with VA. So refinancing sooner would require a conventional refinance.
So if you believe interest rates will be stable or lower in 7 months, you can take the original deal and net 7 k and pay half a point over that time and then refinance with VA or conventional? Am I missing something?
G.E. Box "All models are wrong, but some are useful."
Topic Author
cubaboymatt1316
Posts: 106
Joined: Tue Feb 28, 2012 8:59 am

Re: Ethical Dilemna - Rate Lock Woes

Post by cubaboymatt1316 »

qwertyjazz wrote: Sat Jul 11, 2020 5:29 am
So if you believe interest rates will be stable or lower in 7 months, you can take the original deal and net 7 k and pay half a point over that time and then refinance with VA or conventional? Am I missing something?
At 2.25%, I'd lean towards believing rates will be UP 7 months from now, but that's just a wild assumption based on current economic and health factors.

I've decided to work solely with Lender 1 and accept whatever decision they make (let me float, pay a re-lock fee, no changes, etc.). Thank you everyone for your help.
User avatar
samsoes
Posts: 1488
Joined: Tue Mar 05, 2013 9:12 am

Re: Ethical Dilemna - Rate Lock Woes

Post by samsoes »

cubaboymatt1316 wrote: Fri Jul 10, 2020 9:47 pm [Removed]

Thanks for all the help!
Why did you remove your question?
"Happiness Is Not My Companion" - Gen. Gouverneur K. Warren. | (Avatar is the statue of Gen. Warren atop Little Round Top @ Gettysburg National Military Park.)
User avatar
LadyGeek
Site Admin
Posts: 66416
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: Ethical Dilemna - Rate Lock Woes

Post by LadyGeek »

The OP has removed his post, the thread is no longer productive.

This thread is locked to end the discussion.

cubaboymatt1316 - If you wish, feel free to PM me and explain why you've removed your post. If something is wrong, I may be able to help.

FYI - cubaboymatt1316 PM'd me. The post content contained personally identifiable information.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
Locked