Mortgages And Interest Rates

Mortgages And Interest Rates
Interest rates can affect the​ type of​ mortgage you​ choose and dictate when it’s wise to​ make a​ change .​
Here are a​ few of​ the​ factors that can be affected by a​ swing in​ interest rates:
Choosing a​ mortgage
When interest rates are rising,​ a​ fixed-rate mortgage is​ usually a​ good choice,​ since it​ locks in​ the​ current rate and protects you​ from the​ higher rates to​ come .​
When rates are falling,​ an​ adjustable-rate mortgage (ARM) becomes more attractive,​ as​ its interest rate changes periodically (usually every one,​ three,​ or​ five years),​ allowing you​ to​ benefit from the​ new,​ lower rates .​
Some people choose an​ ARM even when rates are rising .​
This is​ because the​ interest rate on​ an​ ARM is​ substantially lower -- as​ much as​ two percentage points lower than that of​ a​ 30-year fixed-rate mortgage .​
That means you’ll pay less until mortgage rates have increased a​ full two percentage points .​
After that,​ you’ll pay more than a​ fixed rate.
There are also hybrid ARMs,​ which have a​ fixed rate for a​ certain time period -- typically three to​ 10 years -- and then become adjustable .​
(A 5/1 ARM,​ for example,​ has a​ fixed rate for five years,​ after which the​ interest rate is​ adjusted annually.) Hybrid ARMs can be the​ right choice if​ rates are likely to​ rise in​ the​ short-term but then flatten or​ fall .​
However,​ these long-term trends can be difficult to​ predict.
Refinancing
A change in​ the​ interest rate trend can make it​ worthwhile to​ switch to​ a​ different type of​ mortgage .​
When rates are falling,​ you​ can save money by moving from a​ fixed-rate to​ an​ adjustable-rate mortgage,​ so you​ can benefit from the​ lower rates .​
If interest rates appear set for a​ sustained rise,​ switching from an​ ARM to​ a​ fixed-rate mortgage can lock in​ a​ lower rate and protect you​ from higher payments .​
However,​ you​ should make sure that any closing costs don’t offset the​ benefits of​ refinancing.
For more information on​ mortgages and interest rates,​ visit www.lendingtree.com/cec/yourhome/yourmortgage/interest-rate-trends.asp?
Mortgages And Interest Rates Mortgages And Interest Rates Reviewed by Henda Yesti on July 03, 2018 Rating: 5

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