Thinking Of Buying This Year? What If Interest Rates Will Drop?

Thinking Of Buying This Year? What If Interest Rates Will Drop?

With rising interest rates buyers are asking themselves what happens if they lock in at say 5.5% and then the rates drop?

While this scenario is not very likely to happen in 2022, rates have already increased by about 2 points and in fact, all economists are projecting the 30-year fixed interest rates to go 6%-7% before the year is out.

So what is a buyer to do and how do lock-in rates work?

When you lock in your mortgage, and then rates rise, you get to keep the lower interest rate. But if you lock in your rate and then rates fall, you are locked into the higher rate.

Here are the options you have if rates drop while you are locked into a higher rate:

1) Float Down Option

Ask your lender about a “float down option.” You’ll have to pay extra at closing, but even with the upfront cost, you’ll probably save money in the long term by paying less interest.

2) Comparative Shopping

Do your comparative shopping and if you find better rates then apply with another lender.

Keep in mind that switching lenders last minute means starting your loan application process from square one, so make sure the new rate is low enough to be worthwhile.

3) Refinance

Move forward with your deal, and refinance in a year or two when interest rates are at a much lower rate.

Bottom line – you have viable options to work with.

Contact us with any questions relating to mortgages or otherwise. We’d love to connect with you  201.341.4765