Interest Rate Trend

 

 

Any Interest rate trend can make a significant difference in your decision related to mortgage loans. A swing in interest rates can change the type of mortgage, the lock-in period and refinancing you choose.[br]

 

You can choose a particular type of mortgage based on the interest rate trend. For example, you may choose a fixed rate mortgage when the interest rate is rising because you can lock the lower interest rate to protect yourself from further rise in the future. An Adjustable-Rate Mortgage (ARM) is good when the interest rate is falling, since you can benefit from the low rates. Usually interest rates decline once in a few years. Also you may choose hybrid ARMs in which one can choose a fixed rate for some time and later covert into a full-fledged ARM. Ideally, you should opt for a fixed rate for 10 years and the rest in adjustable rate mortgage.

 

Interest Rate Trend – Refinancing  

You can shift to a different type of mortgage based on interest rate trends. For example when interest rate falls, you can switch to an ARM to save money. If you expect the interest rate to be stable for a long period of time, you can switch to a fixed rate loan from an ARM. However, ensure that closing costs are not high. Some lenders impose heavy fees for closing in order to discourage borrowers from switching.[br]

 

Interest Rate Trend – Lock in Period 

You can lock-in the promised rate of interest while you are negotiating with your lender. Once you lock in for a particular period of time, any further increase in interest rate will not affect you during the lock-in period. However, you need to pay a fee for this guarantee.

 

Many of the decisions being made regarding a mortgage loan depend upon how long the borrower is going to stay in the particular home. If the house is to be sold for another five years, it’s better to opt for an ARM since interest rates will be lower than fixed rates. Fixed rate loan is good for the long term.