Refinancing Your Mortgage – Plan B.


Over the past few weeks (and now months), I have been giving refinance advice.  For the most part, my advice has been quite simple:  determine when it makes sense for you to refinance and when that rate is available, move forward with the loan process.  In other words, have a conversation with a mortgage professional now; figure out when it makes sense to refinance; wait for that rate to be available; when it’s available, jump on the opportunity and move forward locking-in your rate, paying an application fee, starting the application process, gathering together financial documents, etc. 

This is Plan A. 

This advice works quite well in a normal type refinance market.  When mortgage rates go down, customers call me (for my business, most are alerted by when their target rate is available).  We lock-in their interest rate for 30 or 45 days and start the process of ordering the title work, appraisal, verifications, etc.  In a normal market, 30 to 45 days is an ample amount of time to get everything processed and closed (even with the refinance 3 day right to cancel — which means you actually need to close the refinance transaction 4 days prior to your lock-in expiration date to make sure that your loan funds on time).  In a normal market, Plan A works just fine.  It worked during the refinance boom of a few years ago, so I know it works.

We are not in a normal market. 

It’s not as if mortgage rates are trending down.  They are jumping around from day to day and hour to hour.  Interest rates don’t fluctuate with any kind of predictability.  When you expect mortgage rates to go up, they sometimes go down, and when you would expect mortgage rates to go down, they sometimes go up.  The market is more volatile than it has ever been and probably more fragile than it has ever been in history.  The government has stepped in and has pushed mortgage rates down (by putting billions each week in to the mbs market) and although most consumers hope for mortgage rates to go lower, there really isn’t any sign to validate this hope.  (All of a sudden people started believing congressmen and the media . . . go figure??) 

If anything, in my opinion, the closer we get to June and July 2009 (the end date for the US Treasury purchasing of mbs’s) the better chance there will be for mortgage rates to move back up to where they were only a few months ago — 5.75% to 6.25%.  

Another issue is timing.  Most investors are taking 8 to 10 business days to underwrite a loan (some 15 to 20 to 25 business days), so a lock-in of 30 or 45 days — which is really only 26 or 41 days to close when you count the right to cancel — likely isn’t enough time to get everything done, so borrowers and brokers are having to extend lock-in’s generally for a fee.  Underwriters have three times as many conditions on loans as in the past, so even if a loan does come out of underwriting in a speedy 8 to 10 days, it may still take a week or more to clear conditions, provide additional paperwork, request additional comparables from the appraiser, order a 2nd appraisal, and to jump through whatever other hoops the underwriter has required (read: dreamed up).

So, as of this Monday (yesterday), my advice is Plan B.

Plan B is also simple, but quite different.  (I don’t use terms like paradigm-shift and thinking outside the box, but if I did, this would be the place).

Plan B says — if it makes sense for you to refinance your mortgage (assuming your credit, appraisal, etc. are in order), and if it makes sense for you to refinance your mortgage somewhere between 5.25% and 4.625% for a 30 year loan and 4.75% to 4.375% for a 15 year loan, you should start the process now. 

This plan will allow you to start the loan application process now — order the appraisal, all of the verifications, the 2nd mortgage subordination if necessary (see post below), and get in line for your loan to be underwritten and approved.  During this waiting process you can actually “float” your interest rate, meaning that you are choosing not to lock-in and protect your rate, but rather wait it out — for blue’er skies, greener pastures, or even the mystical and unlikely 4.5%.

Once the loan is approved and out of underwriting, you are in a position to not only close your refinance quickly, but also to take advantage of a shorter lock-in period and therefore a lower interest rate.  Investors charge a small premium to lock-in rates for longer periods of time (generally lenders offer 15 day, 30 day, 45 day and 60 day lock-in’s each at a slightly different price).  So, if today’s 30 year fixed rate is at 5.125% for a 45 day lock-in, a 15 day lock-in will be 0.25% better, at least.  And if you don’t love the sound of 4.875% fixed forever . . . I’m not sure you know what love is. 

The only downside (risk) would be the cost of the application fee and appraisal fee.  But if you know you are going to refinance, the appraisal is usually good for 90 days . . . and if you can’t find a rate that you like between now and the next 90 days — remember, 90 days puts you into June and because the market often moves in anticipation of events, my opinion is that the Treasury pulling out of the mbs market in July 2009 will start to move rates move up as early as June 2009 — if you can’t find a rate that you like between now and then, well, you’ll just have to keep your 6.0%.  : )

If you fit the description above (you know you need to refinance, just not sure you are ready to lock-in), gather together your last 2 paycheck stubs, your last 2 years’ W2’s, your last 2 bank statements, the most recent retirement account statements, a copy of your NOTE, a copy of your photo ID, a copy of your most recent mortgage statement(s) and give me a call.


Jeffrey Pinkerton is a Mortgage Consultant and President of Hillside Lending, LLC and writer for “the Mortgage Blog.”  Hillside Lending seeks to provide mortgage brokerage services with the highest standards of service, care, honesty, integrity and value; concentrating on owner-occupied, residential financing.  For more information about available programs and interest rates, please visit


3 Responses to “Refinancing Your Mortgage – Plan B.”

  1. Refinance Plan B(2). « Says:

    […] Plan B(2). By hillsidelending In one of my previous posts, I mentioned a time-line of the Feds purchasing mortgage backed securities until July of 2009, and […]

  2. Refinance Plan B(2) « The Mortgage Blog Says:

    […] Plan B(2) By hillsidelending In one of my previous posts, I mentioned a time-line of the Feds purchasing mortgage backed securities until July of 2009, and […]

  3. I was wrong about 4.5% . . . kind of. « Says:

    […] to give up the old way of doing business and think about things a little differently.  I call it Plan B (read the longer […]

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