Over the past few years, you have probably heard many calls to take another look at your mortgage. With interest rates at near-historic lows, this is a smart move for homeowners to make sure that they take advantage of these rates. Now, with the Federal Reserve poised to increase rates three times in 2017, homeowners who have not already explored the option of refinancing should take a look at their existing mortgages before they miss out.
While the Federal Reserve has been cautious to increase interest rates in the past few years, it expects to raise the federal funds interest rates three times in 2017, leading to a year-end forecast of 1.4%. In February, the Fed went a step further, indicating that its first rate increase of the year could come as soon as its March 14 - 15th meeting.
Most mortgage products are based off of a prime rate, which tends to be set at 3 percentage points above the federal funds rate, so homeowners should take the time to review their current mortgage loan program in light of these imminent increases.
Here are a few things to consider as you explore your refinancing options:
- Your credit score. Your credit plays a big role in determining whether you qualify for a competitive mortgage loan. If you find that your credit score is not what you were expecting, take a look to confirm that there are no errors in your report, make sure to pay your bills on time, and try to steer clear of hitting your credit limit. These steps can help you increase your credit score over time.
- The length of time you plan to stay in your home. Adjustable-rate mortgages (ARMs) come with more uncertainty than fixed-rate mortgages, but if you are planning to stay in your current home no longer than the fixed portion of the adjustable-rate loan, this option may make sense for your needs. Also, ARMs tend to have lower initial interest rates than fixed-rate mortgages. Talk to your mortgage lender about whether these mortgages make sense for your needs.
- Your preference for predictability. If you are currently in an ARM or Home Equity Line of Credit product, you could gain more predictability in your payments by locking in a new rate through a fixed-rate mortgage product.
- Term length. Shorter term fixed-rate loans can save you money by decreasing the length of the loan term. This means that you pay less interest over the life of the loan; however, you typically need to be prepared to pay a higher monthly payment for the shorter term loans. Be realistic about what you can afford, and speak with your mortgage lender and financial advisor to understand what will work best for your specific financial situation.
There are many options for mortgage loans, so as you consider what would be the best fit for your needs, be sure to sit down with a mortgage professional to discuss your options.
If you have any questions regarding your mortgage or want to see if you could lock in a lower mortgage rate, our team is happy to help. Contact us at our main line at 303.531.8100 or fill out the form below to have one of our team members reach out to you directly.