Just A Little Patience
This week’s “pop” hit is the 1988 hit “Patience” by Guns & Roses. It seems everywhere we turn today someone is soliciting us to refinance NOW to a lower rate. Yes, 30-year fixed rates have come down to their current national average of 6.20%, which is substantially lower than the mid-7% rates we saw during the past 12 months, but does it make sense to refinance now on a straight rate-term refinance? Probably not just yet.
While “deed dogs” and “list” buyers are calling and trying to sell rates below 6%, you must ask yourself if the national average is running around 6.20% with anywhere from .50 to 1 point, why would these folks be offering rates below 6%? The answer is they are buying down the rate to those levels and will try to convince you that they can get you to closing with “no money” out of your pocket. While this may be true, how they got there is the rest of the story. What they do is finance your cost back into your new loan amount, and thus, you don’t come “out of pocket” at the closing table. Closing costs in the Metro ATL average is 2.0% to 2.5% of your loan amount. So, a $500,000 loan amount may have $12,500 in closing costs… Yes, you are not coming “out of pocket” at the closing table, but you just lost $12,500 in equity to save maybe a little over $300 per month. Simple math tells me it will take you over three years to break even on this transaction. So, if you don’t sell your current home and or REFINANCE again in the next 36 to 40 months, then you would have done the right thing in this scenario. However, with all the news about the FED potentially making additional cuts before the end of the year of another .50% to maybe even 1% and even more possibly next year, why would you pull the trigger now?
Keep in mind that these unsolicited calls, text messages, and or emails are coming from folks who get paid solely if they close your loan, and let’s be honest, mortgage originations are down notably this year… see where I am going with this? Are they truly looking at what is best for you? Or are they looking out for what is best for them? I get the “cash out” refinances to pay off consumer debt with interest rates over 20%, but even in these cases… and with what appears to be lower rates on the horizon… you might just need to have a little Patience.
Remember… the BEST RATE… IS A LOCKED RATE… with a float down… ask me about our program that allows you to lock your rate and then float down if rates move lower.
Make sure you (or your buyer) get pre-approved before looking at homes so we can determine if you are looking in the correct price range and have you armed to submit an offer with a pre-approval letter!
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Blog post date: Thursday, October 3, 2024
