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Riding Out Rate Fluctuations |
As any mortgage broker or lender will
tell you, it's crazy right now with regard to
interest rates. It used to be rates changed
every few months or so. Then they started
changing more quickly and now they change
from day to day.
Given the market turmoil, it's very hard to
see a trend. Are interest rates trending up?
Down? Sideways? No one knows, which is
why I'm now advising clients to focus on a
loan's bottom line, not the interest rate
itself.
If you live in the Northeast, you know you
can obtain a price lock on what you'll pay for
heating oil by purchasing a contract in late
summer or early fall. This contract specifies
what price you'll pay per gallon - and it
protects you if the price of heating oil goes
up. However, it can also backfire if the price
goes below your locked price.
Rate locks can end up costing you
money.
The same holds true for interest rate locks.
Because of the volatile market, clients are
now requesting 30-, 60-, or 90-day rate
locks. A rate lock is a written commitment
between you and the lender where the
lender promises you a loan at a specified
rate. (Don't confuse a rate lock with a rate
quote.) The rate is only valid if the loan
closes before the rate lock contract ends.
In addition, you'll have to pay an extra fee, or
points, for the rate lock. The longer the lock
period, the higher the number of points,
which vary from lender to lender.
Because of the market, rate locks sound like
a good deal, and some banks now market
the rate lock under the guise of protecting
your interests, but like heating oil price
locks, a rate lock can end up hurting you in
the long run.
Let's say you have an estimate for a $100K
loan with a monthly payment of $600 and a
rate of 6%. At closing, however, the rate is
6.25%. The rate difference comes out to an
additional $25 on the monthly payment - an
amount that could be considerably lower
than the one to two points you have to pay
for the rate lock.
Instead of focusing on a loan's interest rate,
learn to understand the difference between
small percentage differences and how they
affect your bottom line. Ask your lender for
their rate lock fees and then run your
numbers using various scenarios:
- What is the difference in monthly
payments between 6%, 6.25%, and 6.5%
and the rate lock fee?
- Will you save money or lose money?
- When do you expect the loan to close?
If the loan is expected to close in 30 days or
less, it might make sense to forego the rate
lock and simply absorb the nominal increase
to your monthly mortgage payment should
the rate increase by an eighth, quarter or
even a half of a percent.
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August's Home Value Improver |
6 Cheap, Easy Ways to
Save on Heating Oil
Enjoying the final days of summer does not
necessarily lend itself to thoughts of thick
wool sweaters and storm windows -
perhaps this fall, it should.
With oil prices
through the roof, the price of heating your
home could make a serious dent in your
budget, so start thinking now about how to
get the most out of every gallon of heating
oil. You'll save yourself some money and
make your home more marketable. Heck,
you can even say it's "green."
- Keep your furnace in good working
order.
Heating oil companies and
gas
providers often go out this time of year to
clean and inspect equipment. Technicians
will make any necessary tweaks to the
system to be sure it's working as efficiently
as possible.
- Insulate your hot water pipes.
When you wait for the water to
warm
up, it's going down the drain and being
wasted. Hot water stays hot longer when the
pipes are insulated. Your local home
improvement stores sell polyethylene foam
tubes with a split in them so that they are
easy to install around the
pipes.
- Install a programmable
thermostat.
You can program your
thermostat to dial down at night, up in the
morning, down when everyone's at work,
and then up again when the house is full.
Turning your thermostat down by 10
degrees at night can save you up to 10% on
your heating bill.
- Close the heaters in rooms that are
not used.
If you're already footing
the
college bill for one of your children, don't
waste money heating his bedroom while
he's away at school.
- Replace your weather stripping.
Check the weather stripping you
have
around your door jam and windows. It wears
out and needs to be replaced every few
years.
- Keep lots of blankets around.
Fleece is
very inexpensive, and with lots of fleece
blankets strategically placed in your living or
family room, no one will have to look far
when they feel a chill while watching TV at
night or working on the computer.
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Like many of you, I have been watching lots
of late night Olympics. And like you, I have
been inspired and amazed at the
determination, skill and spirit of the
athletes.
Each Olympian defines success in his or
her unique way. When I work with clients, I
see the same thing. Everyone who is
seeking to buy or refinance a home has their
own definitions of what a successful
outcome means to them.
It keeps my job interesting to work with
clients and match them with programs
designed to help them achieve success on
their terms.
As always, please feel free to call or
email anytime for
more information on any mortgage topic!
Best regards,
Debbie Siegel
President
Westchester Mortgage
P.S. You're receiving this E-Newsletter because you have a prior relationship with me or with Westchester Mortgage. If I've sent this to you in error, or if you want to remove yourself from the list at any time, just click the "SafeUnsubscribe" link at the bottom of this e-mail.
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Click here to read
my "Mortgage Minute" in
ForeclosuresMass.com's monthly
newsletter. This month's topic: "The Truth
About Mortgage Lending Websites."
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