Refinance Or Ask Mortgage Lender For Interest Rate Change

Added June 19, 2002 by Ilyce R. Glink

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Summary: When you apply for a mortgage loan you may decide to lock in the interest rate early on. As your closing date approaches the going interest rate for mortgages of your type may change. What can you do if the interest rate available at the time of your closing is lower than the rate that you locked in? You can either close on that loan and start the refinance process right away or you can ask your mortgage lender to lower the rate on the loan you're about to get.

WGN-TV Show Notes -- June 18, 2002

WGN's Money Saving Expert Ilyce Glink answers viewer mail.

Question: This is an email from RUF-2-LAIR: I locked into my mortgage a month ago at 7 5/8, but bought down the rate to 7 percent for 1 1/2 points. I close at the end of the month, but interest rates have fallen so far that my 7 percent rate now seems high. What should I do?

Answer: It always seems like a good idea to buy down the rate of your loan because you're going to live there forever, right? However, interest rates are substantially below where your rate is, and your lender is going to make a killing on your loan. As I see it, you have two choices. You can ask your lender to lower your rate before you close - and he may want to charge you for that as well - or you can close and immediately begin the process of refinancing your home loan. Here are a few tips for refinancing your loan:

Look for a zero cost loan. You've already paid too much in fees. If you have to pay something, limit the fees paid to 1 percent of the loan amount. And, don't bother with 30-year mortgages. The average American keeps his or her loan less than 3 years. You can save loads of cash with a 5/1 adjustable rate mortgage.

June 18, 2002.

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