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If you’re getting a home loan, I want to encourage you to Pay as Little as Possible for your interest rate.
Here is what’s going on in the market… At the beginning of the Pandemic Refinance Era, banks and mortgage companies – especially Internet lenders and call centers – hired every able bodied loan officer they possibly could to handle all the refinance inquiries that were coming in. Now that interest rates have increased, those loan officers are rattling around those same call centers, twiddling their thumbs, because the Pandemic Refinance Era is over and the phone has stopped ringing.
So when you call them about a mortgage loan, they are going to tell you what they think you want to hear in order to win your business. And that means they are likely to quote you an interest rate that is very low but also very expensive. And they are going to hope that you are so distracted by the low interest rate that you won’t notice how much it costs. Remember, banks and mortgage companies have a range of interest rates available every day at different prices. The lower the interest rate, the greater the cost – we call it “buying down” the interest rate or “paying points.” So yes, 4.5% sounds a lot better than 6%. But it might not be the best strategy if that 4.5% interest rate costs you an additional $20,000.
I am actually recommending the opposite strategy to my customers – and that is to pay the least amount of money you can for your interest rate. Why? Because every economist I follow believes we are headed for a recession in the next two years. And recessions are characterized by low interest rates. That means you will likely have the opportunity to refinance in the very near future. And there is no point in paying $20 Gs for an interest rate you’re only going to keep for 18 months.
You can win when the market is changing. We can show you how. My name is Emily Caryl Ingram. I lead a team of Mortgage Loan Specialists at New American Funding in Port Townsend, WA.
