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What does it mean for Connecticut Borrowers when interest rates rise?

For the last several years we have seen low interest rates.  In fact the last time we saw a large rate increase was 2006. The fed raised interest rates 17 times between 2004 and 2006.

 

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 low enough to allow things to be affordable.

 

A few options to consider as rates begin to rise are:

 

  1. Take a look at adjustable rate mortgages.  Adjustable rate mortgages, historically, have been 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 because Adjustable Rates are traditionally lower than Conventional 30 year fixed terms.

  2. 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.

  3. Shorter term.  By taking a 10 or 15 year mortgage you will get the best rate a lender is able to offer and at the same time pay your home off much quicker than someone with a 20 or 30 year mortgage.  This can save thousands in interest payments over the life of the loan.

If you have any questions do not hesitate to contact me.  We offer a free consultation to help advise you of the best options available.

 

 

 

Thank you,

 

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Michael Meyer
Senior Vice President of Northeast Financial
NMLS#117875
Mike@northeast-mortgage.com
860-876-0572
210 S. Main St Middletown, CT 06457

Company NMLS#117273 

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