$1300 Fee to lock-in 3.875 Fixed Interest Rate (6 month lock)2018

20 Replies

Hi Guys, one of the banks is charging $1300 fee to do a 6-month rate lock-in at 3.875% interest rate - fixed 30 years.

Would you advice paying for it or taking the risk and wait till summers next year to not pay this fee and get the same or lower rates in Summer 2018?

That seems like a pretty good rate.  Considering that locks are usually 30 days - 45 max.  This seems like a cheap lock extension to get it for 6 months.

Why will your purchase take 6 months to complete?  Just curious.  

Originally posted by @Cara Lonsdale :

That seems like a pretty good rate.  Considering that locks are usually 30 days - 45 max.  This seems like a cheap lock extension to get it for 6 months.

Why will your purchase take 6 months to complete?  Just curious.  

 Its a new property getting built by the builder - so that's why. Bank just offered $1300 credit at closing, so practically now i am getting this rate locked in for free.  Only catch is i need to pay them this $1300 (refundable) + appraisal fee (non refundable fee) now. 

How confident are you that the new build will be done within the 6 month time frame?  I would hate for your lock to expire just before completion....especially if there are any delays, which there always are.  That's when it would get expensive.

Originally posted by @Cara Lonsdale :

How confident are you that the new build will be done within the 6 month time frame?  I would hate for your lock to expire just before completion....especially if there are any delays, which there always are.  That's when it would get expensive.

 I agree - the bank guy on phone said the builder will pay for any delay as per purchase agreement, but i dont believe in phone promises, and have emailed him to confirm.

Get that in writing for sure!  

3.875 fixed for 30 years is a great rate and better then i have been gotten quoted lately. I would not mind paying $1,300 to lock in, if I was confident that I would be able to use it to purchase the property that you are discussing.

Rates are likely to be higher in 6 months. Most expect the Fed to raise at the next meeting, and if the tax bill gets passed I would expect that too to also push rates higher.

Russell Brazil, Real Estate Agent in Maryland (#648402), Virginia (#0225219736), District of Columbia (#SP98375353) and Massachusetts (#9​0​5​2​3​4​6)

Originally posted by @Cara Lonsdale :

Get that in writing for sure!  

 Nope on email, they are saying $1300 is non-refundable if i don't go ahead with them later (if the rates dropped below 3.875 next year), also they are not covering any fee costs if closing is delayed. I am checking with builder if they will. If builder said no, then it ultimately is my risk, but i still want to understand - how much can bank charge me if closing is delayed by lets say 2 months (worst case scenario). My rate lock will expire in early june

It's hard to say.  It depends on the rates in 6 months.  There are many other factors too.  You are doing the right thing by asking the questions, and documenting all the communication.  Be aware that many builder's contracts stipulate that the model home host does not speak on behalf of the builder (which is crazy because they are employed by the builder), so make sure anything you get in writing from the builder is signed by the designated broker for the builder, not just the agent on site.

You don’t mention size of loan, fees, or points. These all help determine how good the deal is. However $1300 seems decent. Rates are expected to go up after this fed meeting and twice more next year.

Oh well the builder said it’s going to take them more than a month to get approval from city - before they can start building - so I no longer can go for this rate lock thing. Let’s see what am I offered in late Jan 2018.

I hope feds meeting this time don’t kill my deal like the last time when I locked in 2015 December.

Hey mike it’s a tiny 247K loan - no points - no fees !

@Varun Parkash that sounds like a pretty awesome deal but how much is the price of the house and the loan amount? By the way, if delivery of the house is delayed for whatever reason, you could probably have your lender extend the rate - usually at some additional cost if rates are higher then.

I’d ask the lender what the cost of extension would be if you need it. That may help you make an informed decision.

In any case, have everything in writing on company or lender disclosures. Do NOT just accept someone’s email. Your LO could leave the company, lose their job, etc.

Paul Defngin, Lender in (#NMLS 199791)

    Originally posted by @Paul Defngin :

    Varun Parkash that sounds like a pretty awesome deal but how much is the price of the house and the loan amount? By the way, if delivery of the house is delayed for whatever reason, you could probably have your lender extend the rate - usually at some additional cost if rates are higher then.

    I’d ask the lender what the cost of extension would be if you need it. That may help you make an informed decision.

    In any case, have everything in writing on company or lender disclosures. Do NOT just accept someone’s email. Your LO could leave the company, lose their job, etc.

     Thanks Paul, thats a solid point about LO leaving job etc. To have them in lender disclosures is the best bet. House Price = 308K (i am estimating closing costs at 7k), loan will be 247K. Let me check on what additional costs are there for extension

    LO said today it’s a fraud for him to write that rate lock in and $1300 credit in disclosures.
    He is cc”INg his boss / branch manager - so I believe him

    Now the catch is LO himself said that your builder is notorious and known for 2-3 month delays & has several complaints on state real estate commission board.

    Now his new offer is : “rate lock extension fee ($260000x .25% = $650) & my manager has GRACIOUSLY agreed to pay for 2 the weeks”

    So basically my rate lock in till June 10 if delayed by 2 more weeks - bank will pay $650 fee for that if it incurred.

    Bigger Q: should i now roll the dice and pay $1792 inclusive of appraisal fee and lock in 6.5 months of 3.875 rate ?

    Or should I wait till April of next year?

    My main risk is builder delaying closing by 2-3 months and then I will have no choice but to stay with same lender and pay extra fee incurred for every additional week after 6.5 months of rate lock expires or forfeit my $1792 dollars and look for new lender at delayed closing time.

    What should I do?

    According to my realtor - his previous clients got the slab house built in 4 months !!

    https://www.google.com/amp/s/mobile.nytimes.com/2017/12/13/business/economy/fed-interest-rates.amp.html

    Since this disaster is out now better to lock

    It seems I have to pay $650 for every two weeks of delay in closing to bank.

    In an event of delay in closing by 8 weeks - I incur a $2800 fee to bank.

    My maths tells me that 260k at 3.875 is going to be $7500 cheaper than at 4.25 interest rate

    So going by this logic - risking $2800 fees makes sense as with the way feds are acting - not sure if I will be able to lock in 3.875 around March - April 2018 as they will have more meetings to increase it.

    I don’t want to have 4.25

    I believe they have 4 meetings per year.

    Locked 3.875 interest rate :) by paying $1300

    That refund of $1300 was only there if I take 4.125 interest rate

    Hope now closing doesn’t backfire !

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