Lock in or not lock in a mortgage rate...that is the question

[Brian Plajer]

Hello,

  I'm under contract for a new build townhome in Charlotte NC. We plan to rent it and hopefully see some appreciation over time. My issue is we close in Aug/Sept and the rates are obviously climbing. when I speak to the mortgage lender they recommend waiting rather than paying the cost to lock in. I am wondering what your thoughts are regarding the decision to pay to lock in a rate vs waiting, given that the property will be rented.

thanks,

[Kyle Deutschmann]

Quote from @David P.:

If your property to is on the higher end I would suggest a jumbo loan. I just closed on a duplex with a jumbo loan on 4.875% with no points. Everywhere else was quoting me in around 6 or above. In the past jumbo loans were typically higher but for whatever reason they been lower then standard loans. I just asked my agent and they are now at 5% no point for jumbo loan so has gone up some but still way below what you hearing from other places. 

I agree with this - according to Mortgage News Daily, avg. jumbo loan rates today are 5.15% compared to 6.22% for a conventional loan. So if you're close to jumbo territory (above $647,200 in most areas) then a jumbo loan might be the way to go. I also have clients considering ARMs now - they're usually fixed for the first 5-7 years so there's not a lot of risk initially and sometimes depending on the loan type the rate could be .25-.5% better on an ARM.