What rising mortgage rates mean for you
Mortgage rates have been making a move. After a period of record lows that roughly spanned the previous two years, rates have been on their way up in 2022. The U.S. central bank has announced its intention to fight inflation with higher interest rates, which means mortgage rates seem poised to continue their rise. If you’re wondering what this means for your finances and homeownership plans, read on to learn how rising mortgage rates may impact homebuyers, owners and sellers.
Buying a home sooner rather than later may be a better deal
When you apply for a mortgage to buy a home, the higher your mortgage rate is, the higher your monthly mortgage payment will be and the less you will be able to borrow when all other factors are equal. For this reason, when rates are rising, buying a home and locking in a lower rate sooner could mean securing a lower monthly payment, qualifying to buy more home or both. That’s not to say you should rush out to buy a home before you’re ready, but if you’ve been on the fence about a purchase, this may be one important reason to act sooner.
Refinancing adjustable-rate debt may save money
Rising interest rates may not only increase the cost of your future borrowing, they may also increase the cost on the balances you currently owe. If you have debt with an adjustable interest rate, such as an adjustable-rate mortgage (ARM), a home equity line of credit (HELOC) or credit card balances, rising interest rates may significantly increase how much you pay in interest on what you owe. For this reason, you may be able to save money by refinancing an ARM into a fixed-rate mortgage or consolidating a HELOC or credit card balances into your mortgage using a cash-out refinance.
Selling a home sooner rather than later may be wise
Even home sellers can be affected by rising mortgage rates. That’s because as mortgage rates increase, the buying power of homebuyers decreases as their monthly payments increase. If you’re planning to sell your home, the pool of qualified buyers for your property may shrink as rates rise, potentially meaning your home may stay on the market longer or sell for a lower price than it would have otherwise. Therefore, it may be advantageous to put your home up for sale earlier if that’s an option.
Thankfully, there’s good news too. As of this writing, mortgage rates are still well below historic averages, and if they drop again in the years ahead, qualified borrowers will be able to refinance. However, no one knows what the future holds for mortgage rates, which is why protecting yourself against potential rate increases is important. For a free consultation to discuss your home financing strategy, get in touch today.