I have a question. My mortgage company is offering me a protection
program. They will lock my rate to go no higher than .75% than what it
is now (5.75%), so if the rates go down, I get the lower rate, but if
the rates go higher, I would have to pay no more than 6.50%. This
would lock me for 9 months (I need 7 months). The mortgage company is
charging me 1% of my loan, so this is over $2,000 for me.

Is this a good idea to do? I'm thinking it is a lot like insurance,
where it is better safe than sorry, but $2,000+ is a lot of money if
the rates don't move higher....

Any advice would be appreciated.

wrote:
I have a question. My mortgage company is offering me a protection
program. They will lock my rate to go no higher than .75% than what it
is now (5.75%), so if the rates go down, I get the lower rate, but if
the rates go higher, I would have to pay no more than 6.50%. This
would lock me for 9 months (I need 7 months). The mortgage company is
charging me 1% of my loan, so this is over $2,000 for me.

Is this a good idea to do? I'm thinking it is a lot like insurance,
where it is better safe than sorry, but $2,000+ is a lot of money if
the rates don't move higher....


I don't have any hard facts for you, but I did look into something
like this a couple of years ago. My vague recollection is that 1%
ought to be able to buy you a solid lock at the current rate (no
upfloat) for a year. But since you are getting a float-down option,
maybe the market says that is worth a .75% float-up and only 9 months.

My other comment is that if you need 7 months because you are waiting on
a house to be built, then...if it was me, I would not put $2000 worth of
eggs into the basket of "the builder will finish within 2 months of when
he said he would"