How Do You Deal With The Interest Rates That Come With A Refinancing Mortgage

How Do you​ Deal With the​ Interest Rates That Come With a​ Refinancing Mortgage?
Your lender is​ trying to​ convince you​ that you​ need to​ apply for a​ refinancing mortgage so that you​ can transfer to​ a​ fixed interest mortgage rate .​
According to​ your lender,​ you​ have to​ take this action if​ you​ wish to​ be free from the​ capricious shifts of​ the​ market rates .​
But how is​ your mortgage affected by the​ economy?
Determinants of​ Interest Rates
As with everything in​ the​ market,​ your mortgage interest rates are determined by the​ interaction of​ supply and demand .​
When borrowing is​ up and the​ economy is​ strong,​ interest rates increase .​
When borrowing is​ down and the​ economy is​ soft,​ interest rates decrease.
But it’s not only the​ market forces that are setting the​ stage .​
There is​ also the​ Federal Reserve .​
Whatever the​ Feds do and wherever they set the​ fed funds play a​ crucial role.
The Federal Funds Rate
Now what is​ a​ federal funds rate? Also called the​ fed funds rate,​ this is​ the​ interest rate that is​ charged whenever banks lend funds to​ other banks .​
The rate’s maturity lasts for only two years or​ less,​ which makes it​ the​ short-term type .​
The behavior of​ the​ federal funds rate affects short-term interest mortgage rates.
As simple economic laws would have it,​ when short-term rates decrease,​ borrowing and spending are likely to​ increase .​
The result is​ inflation and the​ Federal Reserve tries to​ avoid this.
As for long-term interest rates,​ these are rates that last for ten years or​ more in​ terms of​ maturity .​
Short-term rates influence them indirectly .​
They typically rise when attempts to​ assuage inflation come into play .​
When inflation is​ increasing to​ undesirable heights,​ the​ Fed tries to​ remedy the​ situation by increasing short-term mortgage interest rates .​
People whose finances are gravely affected by market movements of​ interest rates are forced to​ consider alternatives.
Heed Your Lender’s Advice and Grab that Refinancing Mortgage
Your lender may be right after all .​
Maybe you​ do need that refinancing mortgage .​
All these talks about mortgage rates are Greek to​ you​ and the​ last thing you​ need is​ to​ have to​ watch over them if​ only to​ keep up with your refinancing mortgage payments .​
Maybe that adjustable mortgage rate you’re in​ right now is​ just not cut for you.
The Difference Between an​ Adjustable Interest Mortgage Rate and a​ Fixed Interest Mortgage Rate
By the​ way,​ do you​ already know what an​ adjustable interest rate is? How does it​ differ from a​ fixed interest mortgage rate? An adjustable rate is​ the​ type of​ interest rate that is​ subject to​ the​ changes in​ the​ market .​
This means that you​ may suddenly find yourself dealing with an​ unexpectedly high interest rate because of​ changes in​ the​ economy.
A fixed interest rate,​ on​ the​ other hand,​ is​ the​ type that is​ unchanged by the​ market trend .​
It remains the​ same no matter what shifts occur in​ the​ economy .​
It is​ more stable and more predictable.
Go on​ ahead and heed your lender’s advice .​
Grab that refinancing mortgage while the​ offer’s still up.
How Do You Deal With The Interest Rates That Come With A Refinancing Mortgage How Do You Deal With The Interest Rates That Come With A Refinancing
Mortgage Reviewed by Henda Yesti on July 01, 2018 Rating: 5

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