Anyone who has followed the mortgage market over the past year knows it has been a wild ride, as rising interest rates continue to pester investors. Thirty-year fixed rate mortgages approached 3.5% last summer, only to shoot up more than half of a point in one day. Since that time, a few months ago, rates have been inching upwards slowly. If you are trying to lock in your interest rate by looking at the economic calendar, you may be in for a tough ride. While news regarding employment, new housing starts and overall economic health does affect interest rates, that information has been factored into the rate already.
No buyer ever wants to leave money on the table, especially when it comes to a lower interest rate, but at some point you need to move forward with the process. If you are comfortable with the monthly payment, fees and service; an eighth or even a quarter point higher interest rate shouldn’t be too much of a deterrence. Much of this is based on your loan size. If you are looking at a million dollar loan, every eighth of a point is a big deal. If you are looking at a loan of a hundred thousand, the increase will result in about $10 a month.
This is not to say that every dollar isn’t important, but everyone’s situation is different. If you are taking the loan, knowing that you probably won’t have the property for 30 years, you can justify taking a slightly higher rate. If you are more concerned with getting the deal closed after rates took a dive, you need to weigh if it is worth it to start the process over. Like anything else, it doesn’t hurt to ask your lender or mortgage broker what they can do if you see rates turning in your favor. Evaluate what kind of loan you are applying for and see exactly how much you are really saving by locking in a lower rate. Rising interest rates may not be as much as you think.