Home > Mortgages > When To Lock In Rates

I get asked this question very often. What Do You Think Interest Rates Will Do The Next Few Days?

My answer will always be..... I honestly don't know because I don't have a crystal ball. If you knew me at all, you know I am not too "jumpy" or too concerned about how the stock market did today or what the interest rate will do tomorrow. I just do not spend my energy contemplating too much about these issues.

For me, I am invested in the stock market for the long term. If the market fell 500 points today or soar 1,000 points tomorrow, it doesn't really affect my personal and financial decisions. The few jittery movements that it makes today, tomorrow, a month from today and a year from now has no reaction to me. What if my retirement fund was worth $200,000 18 months ago but only worth $100,000 today? I am not cashing in tomorrow, so why would I care in terms of the bigger picture? Even if it was worth $500,000 tomorrow, I could not cash in on it anyways.

When I decided to lock in my mortgage rate at 6% 5 years ago, I made a conscious decision based on the interest rates at that time. When I made a decision to purchase the house, I made my monthly budget based on that 6% rate payment. My loan balance is not huge and not small either. A 1/4% rate would had made a $25-$30 a month difference to my payment. I did not get hung up in sweating over rates I was hoping to get. Some financial and mathematical geniuses would tell me if I knew how much extra interest I would save or how much more I would have paid for the house over the life of the loan. I just smiled and say, I know I'm not going to be in the house in 30 years and I know for a fact that I will more than likely to have the loan paid off well before the 30 years anyways.

When my dateline to lock was on, I locked based on my financial comforts. If it was less than what I had made provisions for, it's a bonus for me. If it was a little more than what I had projected, I know it will not send me to the poor house either. All around, I was happy with my purchase and my locked rate.

I do know that there are more sensitive buyers out there, more sensitive to rate fluctuations and I respect that. But if you ask me about When I Would Lock In My Rates, I would say, Are You Happy If You Bought the house at the rate you are quoted today? If it will not give you a financial strain, do it. Interest rates are at its all time low. A few years from now, the risk of rates higher than today's is greater than it lowering. And even if it is, you can always refinance if it makes sense. If a 1/4% or 1/2% in rate fluctuation make or break your purchase, (very respectfully I say this), you might want to re-consider the size of your purchase. It should not make or break you.

Locking rates is not a gambling game. It is what you feel comfortable doing.

Related Articles: