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August 20, 2009
Extend Rate Lock—Why More $?
My rate lock is set to expire 8 days before I close...18 days actually, as we've already received a free 10-day extension. The current rates are actually the same as the rate I locked in at.
I got the loan through mortgage broker (first mistake, I know). And I'm being told that my options are to 1) pay a daily extension fee ($125/day) or 2) give up the lock, wait 30 days and re-lock at whatever the new rate is.
This seems odd to have to pay to keep a rate which is the same as the current rate. Any advice on how to deal with this?
Comments
I don't think it's a mistake to use the right broker, but the wrong broker, different story. The reason I think it's a good idea to pay to extend is that it means the lender is less likely to back out of the deal at the last minutes. That said I think $125 per day is a bit rich. We paid $600 to extend by three months last year.
Posted by: bohuma at August 20, 2009 10:08 AM
I've never heard of a dialy rate to extend, usually a fee like bohuma said is more in-line.
Posted by: daveinbedstuy at August 20, 2009 10:22 AM
Different lenders charge different fees to extend rate locks. Some charge per day some do in increments of 5 days some 10 days.
Usually is works like this. If the rate is better by a certain percentage some lenders will give you a free extension. Some only do this once some will allow for more as long as the extension is covered by the spread. Some lenders charge an extension fee regardless if the rates are better.
If you let the rate expire MOST lenders will give you what is called "worse case pricing" If the rates are better the day after your rate expires you can relock your old rate because it's WORSE. If the new rate is worse than the rate you originally locked you get the WORSE new rate.
If you let the rate expire you can wait 30 days and relock the current rate and not be held to "worse case pricing"
You need to discuss with your loan officer the specific bank's policy pertaining rate locks.
Why do you feel that going to a broker is bad? Large Banks are horrible currently. Mortgage Brokers are worth their weight in gold right now. Banks just don't give a rat's ass about you and will deny your file on the spot for ridiculous reasons these days.
Adam Dahill
adamdahill@gmail.com
Posted by: Adam Dahill at August 20, 2009 10:42 AM
If the rate is expiring because the bank is ragging its feet, then make some noise. Citi hit me with same deal because I didn't return a form same day after they sat on it for 2 months. Yelling worked ;-)
If it's contract back and forth or other non-mortgage negotiations that's taking the time then you're in a bit of a bind. But gives you flexibility to pay or float.
A hassle but one you'll forget about quickly when the deal's done. Good luck!
Posted by: Johnny at August 20, 2009 11:44 AM
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