Mortgage Rates Dropping Like Rocks

For all your days prepare, / And meet them all alike: / When you are the anvil, bear — / When you are the hammer, strike.” – Edwin Markham (Preparedness, 1918)

Mortgage rates are lower than they’ve been in 35 years. Even if you already have a decent rate — say, 6.75 percent — it might pay for you to refinance.

On a $250,000, 30-year home loan at 6.75 percent, for example, you would pay $1,620 a month. But if you had the same loan at 6.25 percent, you would pay only $1,540 a month. That adds up to savings of nearly $1,000 a year and almost $30,000 over the life of the loan. So, even if you had to pay a few hundred dollars in fees to get the new rate, you would be able to break even in less than a year.

Patrick Barta, writing in The Wall Street Journal, offers these tips:

* If you locked in a great rate a few weeks ago, but rates have fallen even further since then, talk to your lender. They’ll be inclined to negotiate with you, because they know that if they refuse to budge, you can always go elsewhere. If the lender isn’t willing to come down somewhat, consider walking. Even if you lose some of the fees you’ve already paid, you could come out ahead.

* If you haven’t yet locked in a rate, request a “float-down” option when you apply. This allows you to lock in a rate and adjust it later if the market changes. (Not all lenders offer this option, and most will charge you a few hundred dollars for it.)

* Even if you closed on a loan, you can sometimes get a lower rate by playing hardball. Under federal law, many refinancing borrowers can back out of a mortgage for up to three days after the loan closes. You can do that and take out another mortgage with a lower rate — but it can be a messy process.

[Ed. Note.  Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Palm Beach Letter. His advice, in our opinion, continues to get better and better with every essay, particularly in the controversial ones we have shared today. We encourage you to read everything you can that has been written by Mark.]