With mortgage rates hitting record lows last week following the news that the Fed would buy up to $300 Billion in Treasury securities on the open market, there was a mad rush to lock in the best rates and inevitably, there was a fair amount of “mortgage envy” on behalf of borrowers who had recently locked. If you just locked in a rate at 5.0% earlier in the month and your neighbor’s getting 4.75% for the same closing costs for a similar mortgage (and you have similar creditworthiness), that raises an ethical and financial question:
If You Already Locked in a Rate with a Mortgage Broker, is it Unfair or Unethical to Seek to Re-Lock or start comparing mortgage rates again?
Argument Against: On one hand, you made a deal, right? After you locked, how would you feel if because rates went up noticeably, your lender called up and said they needed to raise the rate on your due to market movements? You’d be furious, right? What was the point of locking? After perhaps a nominal fee to lock your mortgage rate and start the approval process, there are tons of man-hours that go into assessing your financial statements, credit reports, income verification, etc. They run a risk each time they start this process since the deal isn’t closed until closing itself and in theory, you could walk – so they’re going on faith that you’re going to honor an agreement you made to go through this the deal.
Argument For: On the other hand, are consumers supposed to put aside a 30 year savings totalling perhaps tens of thousands of dollars over a commitment they made to someone or some company they don’t have any actual connection with? Would the person on the other end do it for them? Heck, people are walking away from their homes altogether because they’re underwater; this would pale in comparison. In this day and age, you hear more and more often, “You have to look out for yourself”. The Net Present Value of your mortgage difference could be enormous, even if you have a lower monthly cost 40 year loan.
I’d be interested in your opinions and then I’ll share my opinion on the matter.
You're Not Following Darwin's RSS? Check out Why You Have to Subscribe to Darwin's Finance!
If you enjoyed this post, you can get free updates through RSS Feed or via Email whenever a new post is published. Rest assured that you can unsubscribe at any time via the automated system and your information will not be sold, archived or utilized for any other "nefarious" purposes.