After falling over the past three decades, mortgage interest rates finally seem to be on the rise again. Although no one can predict the future of rates (economic trends, government policy and public opinion all play a hand), the current consensus seems to be that rates will continue up from their recent historic lows. So, what does this mean to you? Here are the ways you could be affected by rising rates.
New financing will become more expensive and restrictive
Higher rates generally mean that new financing will be more expensive. Your exact costs will vary based on the products and programs available to you. A higher cost of borrowing also means the total amount of financing you can obtain will likely decrease. In a rising-rate environment, obtaining financing sooner rather than later is usually preferable, provided you are financially prepared.
Rate locks will become more important
When rates are increasing, the ability to lock in a rate while you shop for, build or close on a home becomes very important. We offer a variety of rate lock options for periods ranging from 10 to 360 days so you can have more time to close on your home without worrying about market movement.
Refinancing strategies will change
Rising rates affect which refinancing scenarios are beneficial to you. If you have a fixed-rate mortgage, rising rates may mean you can no longer refinance to a lower rate. If you have an adjustable-rate mortgage or other adjusting-rate debt, refinancing your mortgage or consolidating debt to a fixed-rate and/or a shorter mortgage term may help you avoid the cost of further rate increases.
Adjustable-rate costs will increase
If you already have an adjustable-rate mortgage, or if you obtain one in the future, your monthly costs will increase as rates rise during any adjustable-rate period of your loan. The exact change in your expenses will be determined by both current rates and the terms of your mortgage.
Thankfully, despite the recent increases, mortgage rates are still at some of their lowest levels in the past three decades. If you’d like to know if you should adjust your home financing strategy based on rising rates, please contact me for a free mortgage consultation.