Mortgage Gurus-locked rate question

[cibomatto]

Hey all, A few weeks ago I just locked in a mortgage rate that I was pretty happy with although I am not closing until 16 april on my new home. NOw I know that locking a rate helps protects you from increased mortgage rates but what happens when the mortgage rate drops? I am seeing through various news artciles and bank sites that rates or still dropping.. Will my home loan company automatically give me the new lower rate or am I locked ?

[cohocarl]

It really depends on that bank you are dealing with. If the bank sells their loans on the secondary mkt., it's not likely they will drop the rate for you. Once you lock a loan, they probably commit to sell it at that rate within either 30 or 45 days. (and make lots and lots of $$).Really up to the bank. Each one is different. Many people believe mortgage interest rates are the same at all banks, but they aren't. They are in it to make $$$$$$$. It's a business. Is your loan officer on commission??????? I could tell you some stories that would amaze you.

[cibomatto]

I am not sure if he is on commision. The name of the bank/loan place is First Horizon Home loans. I feel pretty good with them and like I said I am thrilled with the rate that was given to me. Hmm although I guess I am under the assumption that all banks carry the same interest rates and that it is the market conditions that dictate what the rates are at any given time. I guess I could call them up tomorrow (that would be the simple obvious thing to do LOL)...

[Sputnik]

Well when I went and got pre approved for my mortgage in Jan I locked in at 5.25%, but since then, my locked in rate has dropped to 4.65% for 5 years and if it continues to drop until March 31st (my closing date) I will end up with the lowest rate. Pretty sweet, I must say. This is the way my bank operates - they said they pretty much have to give me a lower rate because I could just go to another bank thats offering the low rate as well.

[cohocarl]

Quote, originally posted by Sputnik »they said they pretty much have to give me a lower rate because I could just go to another bank thats offering the low rate as well.Yes and no. In this area, most new purchase mortgages get turned around in about 30 days. It would be difficult to change banks a week before the moving truck is scheduled to arrive, and also the person may have already had to pay for the appraisal and/or application fees which you'd have to pay again if switched banks. I'm sure there are differences there in Canada compared to around here also.It sounds like your deal Sputnik is pretty good if they drop the rate for you. Are you purchasing a new home or refinancing?

[Sputnik]

A new home. Our first. We bought a condo about 3 blocks from our current apartment. The only thing that sucks is they're going to change our phone number! And its only 3 blocks difference. Grr.

[pmh013]

I think mortgages in Canada differ quite a bit from the US. When we bought our house 2 years ago, we went through a mortgage broker, which is a bit of a new thing around here. In any case, the broker had gotten us approved for a mortgage with TD Canada Trust. The paperwork went to the lawyer, and the day before, we find out that the agent that the broker worked with wouldn't approve the mortgage at the rate we'd been promised due to a technicality (the house isn't in the city). We scrambled for a week while we got approved for a different mortgage, and the lawyer had to redo the paperwork. It was very frustrating, and I wouldn't recommend getting a mortgage broker if they have no experience doing a mortgage in your community. In any case, it just goes to show that you need to be on your toes when you're shopping for a mortgage.Back to cibomatto's question, I definitely think it depends on the bank. Personally, the markets were in a different boat entirely 2 years ago, and our mortgage is floating at prime minus some percent, and is capped at some other higher percent. However, we make payments like it's locked in at that upper level, so we pay more on the principal.

[StampedeVibe]

Here's an article you might want to read. It's for Canada, but the gist of the article can be applied to the US as well.http://www.insurance-canada.ca...4.phpIn other words, if you can take the change in your mortgage payments, you're way farther ahead with a variable rate mortgage, but if you need stability (i.e. things are tight), then a fixed rate would be better.

[Stang2Vibe]

I think that the big thing that is being missed here is that you can always refinance your mortgage if market conditions change to make it profitable to do so. If you have a locked in rate of say, 5% and some bank is offering 3.25% at some later time, you can refinance at the lower rate and lock that one in. You just have to be aware of the costs involved in refinancing and check to see if the refinancing would cost more than what you are saving by switching to the lower rate. Also, different lenders will have different refinancing costs so you have to shop around there as well.