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August 28, 2012

Swinging mortgage rates: How to refinance and save thousands in this volatile market

by Jason VanDyke

For those of us who have kids, the start of the school year begins an entirely new morning routine. The mornings around my house the last few months have been filled with thoughts like, “what am I going to do to keep this little boy busy, happy, and active today?” At the end of every day I feel like an Olympic marathon runner conserving just enough energy to somehow lean forward and fall across the finish line.

The next few months will find us exchanging our marathon shoes for sprinter kicks. Now the mornings will be fast and furious, as we try to get showered, dressed, fed and out the door by 8 a.m. every morning. The change takes a bit of getting used to for all of us, but by sitting my little one down and painting the picture of how things are changing he understands and adjusts.

With respects to mortgages, one of the biggest changes I have seen over the last few months is how much volatility we are seeing in the markets on a day-to-day basis. After a period of relatively uninterrupted drops in interest rates, market volatility is creating rather significant swings in closing costs scenarios that can leave borrowers frustrated and confused.

A good client and friend of mine called me a few weeks ago to refinance his $350,000 mortgage from 4.625 percent down to 3.625 percent. This interest rate reduction would save him about $265 per month and had an estimated closing cost of $2,500. Under these conditions, it would take him just 10 months to recoup his closing cost (in savings from the reduced monthly payment). After reviewing the plans, he called me just 36 hours later to say “Let’s move forward.” Unfortunately, the rate was already gone.

Due to movement (volatility) in the markets, his closing costs for his scenario went from $2,500 to almost $5,000!  In just 36 hours his closing costs doubled simply because of the bond market movement which negatively affected interest rates.

Luckily, the volatility kept rates moving around, rather than settling at this higher level. I watched interest rates over the next week and when the time was right, we locked in a closing cost structure that ended up working out better than what we originally quoted – just $800!

With so much volatility in the markets it is important to work with someone who has an understanding of why (and when) interest rates move the way they do. Being able to capitalize on interest rate dips can literally save you thousands of dollars in a very short period of time. Give me a call for a friendly, free, and easy discussion about refinance and I can help you capitalize on the markets.

 Jason VanDyke is a loan officer with Central Coast Lending. You can reach him by email ([email protected]) or phone (805.801.2139).Central Coast Lending is a California mortgage brokerage based in San Luis Obispo County. With offices in San Luis Obispo, Morro Bay, Paso Robles, and Arroyo Grande, Central Coast Lending is the top source for Central Coast mortgage, real estate, and home loan needs. To see why using a broker offers lower rates and superior service, click HERE. For a free, hassle-free online pre-qualification click HERE or call 805.543.LOAN to talk to one of our expert loan officers.

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