Refinance to a Fixed-Rate Mortgage for a Better Home Loan
Mortgage rates have been inching upwards since earlier this year. Slowly at first, but the jumps are increasingly hard to ignore. If you have an adjustable-rate mortgage (ARM), now is a good time to refinance to a fixed-rate mortgage.
According to economists, the Fed is expected to deliver back-to-back interest rate hikes in May and June 2022.
Historically, mortgage rates rise with inflation. Investors watch the trends with caution, and often mortgage rates rise based solely on the anticipation of inflation. Add the fact that the Fed is also raising the federal funds rate, and it’s hard to ignore the potential long-term rise of mortgage rates.
If you’re concerned about your mortgage payment and want the financial stability of a fixed-rate mortgage, we can help. Feel free to reach me directly at (408) 610-8011 or schedule a call.
How the Federal Funds Rate Affects Mortgage Rates
When the Fed decides to increase the federal funds rate, it directly impacts mortgage rates. For those homeowners who currently have an ARM or a HELOC, this means your rates could jump without much warning. The result could be a higher mortgage payment, higher equity loan payments, or more of your payment will go toward interest every month instead of principal.
Adjustable-Rate Mortgages
Adjustable-rate home loans have variable interest rates. This means that the rate will fluctuate, rising or falling based on the fed funds rate. If the fed funds rate goes up, your rate will go up, and your mortgage payment will go up. There are different caps for each loan, limiting how much your mortgage payment can increase. Talk to your mortgage broker to determine if refinancing your home loan can save you money and protect your mortgage payment.
HELOC (Home Equity Line of Credit) and Home Equity Loans
Most home equity loans and HELOCs are directly tied to the prime rate (which is typically 2-3 percentage points above the federal funds rate). Therefore, if the federal funds rate goes up, this causes the prime rate to increase, and interest rates for HELOCs and home equity loans will rise in tandem.
Similarly, HELOCs have a flexible rate that is impacted directly by the federal funds rate. This means your HELOC rate can rise at any point, and with a higher rate, you’ll have a higher payment.
As an aside, most home equity loans are fixed-rate loans, which means your payment won’t change. However, since home equity loans typically have a higher interest rate than a fixed-rate mortgage, it could be wise to refinance.
If you’re concerned about your mortgage payment, we can help. Feel free to reach me directly at (408) 610-8011 or schedule a call.
How to Compare Offers and Get the Best Fixed-Rate Home Loan
Working with a qualified mortgage broker can help you compare loan offers and get your best mortgage. Since mortgage brokers work with multiple lenders, an experienced broker can shop for the best rate and loan terms based on your qualifications. What’s more, a mortgage broker can explain refinancing options that you might not know about and get you a mortgage that can save you money.
We’ll guide you through these five steps toward a better mortgage:
- Discuss your situation and help us understand your goals.
- We’ll analyze the market and lock in your best mortgage rate.
- Review your new refinancing options together.
- Gather the final documentation for underwriting.
- Verify the value of your home with a home appraisal.
Final Step — Close on your new home loan with a low fixed-rate payment!
As an experienced mortgage broker, we’ll help explain your best refinancing options, get the lowest rate possible, and help you overcome any obstacles that may come up.
If you’d like to discuss your specific situation, please schedule a call or reach me directly at (408) 610-8011.
Summary
If you have a mortgage with an adjustable rate, a home equity loan, or a home equity line of credit, now is the time to refinance your home loan and secure a fixed-rate mortgage.
Refinancing to a fixed-rate mortgage secures a fixed monthly payment for the life of your loan, no matter how the market shifts. You’ll have a steady mortgage with a predictable monthly payment you can afford, regardless of inflation or shifts in the market.
What’s Next
If you’re wondering how to afford your mortgage with rising rates, refinancing now can help establish financial stability. We work with homeowners throughout California, Oregon, Washington and Colorado. Our goal is to help you reach financial freedom and save money on your mortgage. Feel free to reach me directly at (408) 610-8011. We’d love to help.
