Should your buyer float their interest rate or lock now?
Interesting question. Some of you really gotta be working with your lender to have that conversation with them. But let me give you a little bit of what's been happening to date in January through roughly March 2021:
Let's look at the numbers and dig into them that I got from one of my lenders — who is an incredible rockstar in the lending world. His name is Brian Case and his team at Guild Mortgage gave me these numbers:
For the entire year of 2021 so far, a floating borrower — or somebody that took the gamble and threw the dice to see if they can get a better rate tomorrow than
they can get today — would've won 41% of the time. And they would have lost 58% of the time.
Because 48% of the time rates went down and 58% of the time they went up. So it's a gamble that may not be paying off.
Overall interest rates have gone up about a half percent since January. Where do we think they're going to go? We don't know, but the market is very volatile right now. That's why a lot of people are looking at locking in — especially if they see it on a daily basis, that rate hit a really good number.
The risk is: Are you going to be comfortable paying an extra half percent or would you rather lock in and maybe pay an extra eighth of a percent? Those are the kinds of conversations that the lender needs to be having with their clients to make sure that the clients are making good decisions. Right?
One of the things that will motivate a buyer is to really look at those numbers when you push them out over 30 years. Because those numbers can add up to tens of thousands of extra dollars.
So you definitely want to be an advocate. You want to be a coach. You want to help people understand the difference between the benefits of floating versus locking. And you want to work with a top notch, high-quality lender in your market. It's so essential.
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