Unlike some other financial products, mortgage fees fluctuate regularly. Monitoring this movement will help you determine the right time to pull the mortgage or refinance trigger for your purchase. Here’s what you need to know when tracking changes:
How often should you compare mortgage rates?
In general, small movements in mortgage fees should not determine your buying and selling decision. However, when it comes to refinancing, the fee is the most important thing. Here’s how to think about mortgage shopping exercises:
- Shopping for a new home: Your decision to buy should be based on personal and financial preparation preparation, not on whether or not the interest rate on your mortgage is below a certain level. However, you want to get the best deal possible, so if you get closer to buying, you will need to check the price once a day. If you are working with a lender, the expert can give you guidance on when to lock your rate.
- Thinking about selling: This is also a scenario in which your living environment and personal finances are greater than your mortgage rate. The sales decision and the process of listing your home will take place over several months, but mortgage interest rates may move hourly. Therefore, there is not much reason why sellers and potential sellers are worried about mortgage rate movements. Certainly, a surge in rates may weaken demand, but a decline could lead to more offers. But they are out of your control as a seller.
- Refinance: This is a scenario in which checking the rate really makes sense. After all, Refi is about reducing interest rates on your mortgage. For example, let’s say you are waiting for your fee to drop to 6.25%. If the fee falls below 6.5%, it makes sense to check the rate at least once a day, hoping to meet your refinance rate target.
How often does mortgage fee change?
Mortgage interest rates are constantly liquid and can change daily or multiple times a day. These changes can be mild or more volatile, depending on what is happening in the broader economy.
From a historical perspective, these changes are not new. For example, in the 1980s, mortgage rates were in teens. In 2020 and 2021, they were record lows.
Details: Mortgage Fee History: From the 1970s to today
What factors determine the mortgage rate?
Mortgage fees may change for a number of reasons, including:
- Economic situation
- inflation
- US Treasury, particularly the 10-year Treasury bonds
- Federal Reserve Policy
- Global events such as natural disasters and wars
Your own mortgage rate will be affected by:
- Your mortgage lender
- Your Credit Score
- Your Debt and Income (DTI) Ratio
- Loan size
- Property Type
All of these factors are important, but at a 30-year fixed mortgage rate, the closest parallel is the 10-year Treasury yield. This is the effective yield rate on US Treasury debt and is one of the safest investments for assistance from the US government. When investors feel uncertain about the economy, they try to reduce the risk. Therefore, demand for Treasury banknotes tends to rise, increasing their prices and lowering yields. Mortgage fees usually follow this yield in margins or “spreads.”
Questions to ask when comparing mortgage fees
Mortgage rates help you determine the amount you pay each month for the loan and the total interest fees over the length of the mortgage. When comparing mortgage fees, there are a few questions to consider.
Which loan do you qualify for?
Different loan types include different interest rates, so make sure you are comparing apples to apples based on the type of mortgage you can approve. For example, adjustable interest rate loans usually start at a lower rate than fixed-rate loans, which change after the initial period, but 15-year loans tend to take on lower fees than 30-year loans.
How much do you put?
The higher the down payment, the higher the chances that the interest rate will be lower. Instead of estimating during the pre-approval process, know exactly how much you are putting so you can get an accurate estimate from the lender you are considering.
What is a “good” mortgage rate?
Mortgage fees change daily, so it can be difficult to know if you’re the least likely to find them. Bankrate offers daily benchmark fees, including 30- and 15-year fixed-rate mortgages, based on a survey of the largest U.S. mortgage lenders.
However, don’t forget that the actual fees you receive are based on your credit score, income, etc. The more you shop, the easier it will be to understand what a good rate is for your credit and financial profile.
What is APR?
The terms interest rate and APR are often used interchangeably, but they are not the same. Both are expressed as percentages, but the interest rate on a mortgage represents the interest charged to the principal of the loan, or the amount you owe. In contrast, an APR, or annual rate, indicates the annual cost of a loan, including interest, some closing costs, and other charges. The APR is an all-in-cost, more accurate picture, and is always higher than interest rates.
By law, lenders must disclose APRs on loan offers, but they may only include a portion of the costs of the APRs that are being advertised. You can use that information when asking the APR what rates the lender considers and comparing options.
How much does the closure cost and fees do they cost?
Some lenders are flexible with regard to closure costs, such as origination fees. Lenders may be able to completely waive certain costs, such as valuation and application fees. It’s helpful to know this information when comparing.
Are you paying for mortgage points?
In some cases, APR A lenders will include quotes that include mortgage points, fees you pay at the end in exchange for a lower interest rate. Usually, each point costs 1% of the total loan amount and cuts the interest rate by 0.25%. Depending on how mathematics works, it may not be worth paying points, so compare these scenarios carefully.
What is your timeline?
Once you find a rate you like, you can lock it, so it won’t change when you buy a house. Lock-in Rates are usually valid for 30-60 days, but sometimes up to 120 days. However, if you don’t plan to close your mortgage within that time, it may be best to keep an eye on the fees without taking any steps to lock it.
Have you already locked the fee?
Even if you already have a fee lock, you can continue to compare mortgage offers, but usually lenders can’t break the lock without paying the fee. If your lock doesn’t have floatdown provisioning, you won’t be able to take advantage of lower fees unless you resume your mortgage process with a new lender. However, depending on the rates, it’s worth it.
If you work for a mortgage broker, please note that the broker can do some of this job for you. Brokers can work with multiple lenders to help you find a good rate. However, we also recommend doing your own research so that you can compare the fee offers to those offered by the broker.
