The answer will often be more a function of the Borrower’s personality than of the mathematics. Those who prefer to control events will strike while the iron’s hot and the rates are low, while those who simply can’t bear the idea of a huge prepayment penalty will freeze like deer in the headlights and let outside events, rather than their own actions, dictate the outcome. The concept of the “time value of money” also, of course, works into this decision-making process. Part of the algebra must contain an analysis of how much money you feel you can make by gaining access NOW, rather than 3 years from now, to this once-trapped equity.

I have seen procrastination turn out to be both a huge mistake, as well as the best move that a Borrower could have possibly made. I have seen forward commitments (early rate locks) seem visionary in retrospect, or abysmally misguided.

As a mortgage broker, it’s interesting to bring the facts to the table, offer a carefully considered, professional opinion, and then see what course of action a client decides to take. There are many other aspects of advising our clients which are quite black and white, and are driven by our experience, yet this is a gray area that is quite interesting, and it always reveals a lot about a client’s worldview. As technical as commercial real estate financing can be, this is the territory that must be navigated with a leap of faith and good gut instincts.

© 2008. Gregg Winter. All Rights Reserved.
Unauthorized use of this material may violate copyright, trademark, and other laws.

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May 2003

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