What does it mean for homeowners when interest rates rise?

For the last several years we have been in a historically low interest rate environment. In fact the last time we saw rate increase was 2006. The fed raised interest rates 17 times between 2004 and 2006. Since we have seen rates hit rock bottom.

Soon the Fed will move to increase rates as the economy moves in a positive direction and the unemployment numbers come back to normal figures.

What does this mean for a person purchasing or refinancing. First no one expects rates to move in a straight line. Everyone expects the Fed to increase rates incrementally. For those looking to buy or refinance interest rates should still be very low allowing for affordability.

A few options are

Take a look at adjustable rate mortgages. Adjustable rate mortgages have always had 3 and 5 year fixed terms. Today you can get a longer fixed term that covers 7 or 10 years. This builds in a lot of security in knowing your interest rate is fixed for an extended period of time. These loans are very attractive for someone who will only live in their house for a few years.
Save more money for a down payment. Typically with a larger down payment you can qualify for a better rate. Higher loan amounts for lenders mean more risk, which equals a higher interest rate to off set the risk.
Shorter term. By taking a 10 or 15 year mortgage you will get the best rate a lender will offer and at the same time pay your home off much quicker that someone with a 20 or 30 yr mortgage. This saves thousands in interest payments.

If you have any questions do not hesitate to reach out to me.

craig picCraig Thibeau
Senior Loan Officer
North East Financial Middletown, CT
Ph 860-334-1354
NMLS 398576 Company NMLS 117273
craig@northeast-mortgage.com
www.northeast-mortgage.com