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Lowest Rate Not Always Better!

Everyone wants the lowest rate but today more than ever, the lowest rate doesn’t always save you the most money. Rates are the highest they’ve been in like 12 years! The key to saving money today is looking at this as a short term 2-step process and using lender credits to eliminate closing costs. Lenders have access to a whole rate sheet and for this example, let’s say 4.5% is the par or “going” rate. If you want to get a “more attractive” rate like 4.25, you’ll have to pay extra costs or “points” which will be thousands of dollars. But on the flip side, if you take a higher rate like 4.75, the lender will actually pay you money which goes toward closing costs. Lets say buying down the rate saves you $50 a month but costs you $3k extra upfront. This would take you 5 years to recoup that cost. If you refi or sell within that time, you lose money. Now taking the higher rate, you will pay an extra $50 per month but the plan would be to do a zero cost refi within a year or two saving you thousands. It’s not about the percents, it’s about the dollars and cents!