Low appraisal, falling rates. Should the lender offer new terms?
Q: I locked in a rate. The property appraisal came in low, so I negotiated a lower sales price. Now interest rates have fallen again. Can I cancel the lock-in, get a lower rate for the smaller loan amount? These seem like two separate transactions to me, but the mortgage lender disagrees.
A: There's no "law" when it comes to a lock in. You can ask the lender to consider lowering the interest rate for you; they are under no obligation to do so but may. Of course, there is always the "nuclear option" of canceling the entire deal, but that can be expensive and burdensome, especially if the property is a short-sale or foreclosed home. You will need to decide if the loss of any fees you have paid and the hassle of restarting the process all over again is worth any small reduction in interest rate you might get.
A 25-year expert observer of the mortgage and consumer debt markets, Keith Gumbinger has been cited in thousands of articles covering a wide range of consumer finance and economic topics in outlets ranging from the Wall Street Journal to the Bottom Line newsletters. He has been a featured guest on national broadcasts for CNN, CNBC, ABC, CBS and NBC television networks and has been heard on NPR and other national and local radio programs. Keith is the primary researcher and writer for HSH.com's MarketTrends newsletter and has authored or co-authored a number of consumer guides on mortgages, home equity, refinancing and more.