Frequently Asked Questions
Q: Within reason, how low could interest rates go on 30 year fixed rate mortgages with no closing costs?
A: The record low yield on the 10-year U.S. Treasury bond was 2.05%, which occurred last year. The record low margin of the 30-year fixed rate mortgage over the 10-year treasury yield was 1.7%. Thus, 1.7% + 2.05% indicates that 3.75% could be a bottom for 30-year mortgage rates.
Q: How long could the current downtrend last?
A: The last downtrend lasted 47 months. If the current downtrend follows suit, then rates could fall through June 2012.
Q: I hear rates are in the 4% range, so should I now pay closing costs to secure a lower rate than a no closing costs mortgage?
A: No. Because the downtrend is in existence, if you pay closing costs now, then you are forfeiting the opportunity to get the same rate for free in the future.
Q: What is the best strategy to take advantage of the downtrend?
A: Refinance on a periodic basis, approximately every 4-6 months, and ultimately get the lowest rate without paying closing costs. When you cannot get a lower rate and the downtrend is over, then you may consider paying closing costs to get an even lower rate.
Q: How long does it take to recoup closing costs?
A: Usually about 6 years.
Q: How do 30 year Jumbo no closing costs mortgage rates compare to conforming rates?
A: Normally, jumbo rates run about the same to ¼% higher than conforming rates. However, recent jumbo rates have been 1 ½% higher, but are starting to move back towards the normal relationship.
