If you’ve looked into getting a new credit card recently, you’ve likely been shocked at just how high the average APR is these days. Credit card companies have their interest rates climbing into the pure punishment range with rates between 16% to even 24% not even being particularly unusual anymore. Indeed, this rise in interest rates with most lines of credit ought to drag your mind back to one of the biggest investments of your life: your house. The good news is, interest rates aren’t climbing for home mortgage, they’re dipping lower than ever before! It’s great news for most, and many people have taken advantage of the ever-falling rates in order to save money in the long term on their loan or even to wrap multiple debts into one debt with a lower interest rate. Indeed, buying and refinancing real estate is on the rise, thanks to our current interest rates, but what does it mean if interest rates start to rise again? Does refinancing or purchasing a new house still make sense in that scenario? Let’s take a look.
The most important part of any financial hardship is to not panic. Here at Lending Studios, we know how the pressure can set in with these decisions. Interest rates aren’t stagnant, and neither are housing prices and it can be easy to start feeling the stress of the situation if you dwell on it. The best thing to do before you take any large financial step is to remind yourself that timing is important, but that does not always have to do with the timing associated with the market. You’ll need to be ready to pay the refinance fees, the closing costs, and other fees. You’ll need to feel ready at this point in your life to make this financial step. In other words, finance requires more than one piece of the timing puzzle to fit together. It has to be the right time for you and the market. So, don’t let the pressure set in where it’s not needed. You need to be able to clear your mind and proceed with confidence in regard to any plan you’re making regarding your future financial health.
If you’re looking to combat rising interest rates, whether you’re considering buying a new home, refinancing, or even just worried about an ARM, there are a few things you can consider first.
An ARM, or adjustable rate mortgage is made to adjust throughout its lifespan. That means, often, the interest rate you paid in the beginning of the loan term will not be the same as the interest rate you pay down the road. If the rising interest rate you’re worried about is a more sure-fire thing than market instabilities and the normal rise and fall of the interest rates available, there are still actions you can take to combat higher monthly payments. Indeed, if you have an ARM, you can easily offset some of the potential increase in interest rate by paying off the loan faster than the contract details. If you’re dealing with a monthly mortgage rate of $500 a month, and the interest rate is likely to rise from 3% to something closer to 5% then you can offset that monthly cost by paying a little extra additional on your mortgage every month until that interest rate change is made. Even putting forward as little as an additional $50 per month could drop the amount you’ll be paying in the future significantly. The lower the principal of the loan, the lower the total amount of interest can be charged on each monthly bill. Paying 3% interest on $80,000 principal is much different than paying 3% interest on a $70,000 principal.
However, if you’re looking to save money in the long term, it’s always a good idea to refinance at a lower interest rate with a fixed rate mortgage as soon as possible. Doing so will ensure that you pay the same interest rate throughout the life of the loan, allowing you to better control the grand total of the house when the loan is paid off sometime in the future.
If you’ve been considering refinancing for some time, you already know how low mortgage rates are and what goes down must come up. If you’re considering a mortgage refinance today, we would urge you to pursue the refinance sooner rather than later. No matter how you slice it, past interest rates just can’t be as important as those of the future, especially if you haven’t pursued your refinance just yet.
Recent trends suggest that mortgage rates will start to inch upward in 2021. However, determining when they’ll increase and by how much is determined by a few key factors. One key factor is the United States is able to deal with the pandemic as the year continues to unfold. Also the Federal Reserve’s decision to keep interest rates low as well as inflation will also determine this year’s rise and falls.
Economists are estimating that when a vaccine rolls out, we’ll see a bit of inflation. Thanks to the large number of folks that have been out of a job, as well as the various stimulus packages, we’ll see a rise in inflation and create slow, steady economic growth for the next year and some change if all goes to plan. That means that mortgage rates will likely rise in tandem with those factors. In other words, if you’re looking to give yourself a deadline on when to decide on your refinancing options, we’d say that perhaps sometime before the vaccine rolls out would be a good time frame.
If you’re ready to start pursuing refinancing at a nice, low rate, sooner rather than later, we’re here to help. Lending Studios provides refinancing options for people across the United States, and we keep the entire process simple and easy to understand. Start exploring rates today!