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Options For Locked Borrowers if Rates Fall

There are hundreds of thousands of borrowers across the country with locked in interest rates, and most are wondering what their options are when rates fall.

First, we like to remind borrowers that they were smart to lock in the first place. We remember all too many times over the past 20 years when borrowers did not lock and instead tried to “time the bottom”. These borrowers were often badly burned by unexpected rate spikes. Fall of 2010 is the most recent time when this happened.

Rate Roll-Down: If rates fall significantly after we lock, many lenders allow us to roll-down the interest rate for a fee. This often requires rates to fall about 1/4 of a percent before we can roll down a rate 1/8 of a percent. This usually does not happen within a 30 to 45 day lock period.

Close as fast as possible, and then re-lock within 60 days. This is usually the best strategy, particularly for purchases when there is no time to go to another lender and rates have not fallen enough for a “rate roll-down”.

Most lenders only require that we hold loans for 120 days. Hence, we can lock in a refinance with a 60 day lock as soon as 60 days after we close an existing loan. This strategy allows us to re-lock quickly to take advantage of the current market, but still not pay off a loan before the required 120 period ends.

Jay Voorhees
Founder/Broker | JVM Lending
(925) 855-4491 | DRE# 01524255, NMLS# 335646