While most of the country is experiencing cool temperatures, spring is right around the corner. To help you prepare for the busy season of home buying, selling and refinancing season that lies ahead, we’re offering these 3 tips on how to make the most of a mortgage in February.
1. Have a low, long-term rate? Don’t rush to pay off your mortgage
The Federal Reserve will likely increase interest rates again in 2018, and each time the rate goes higher that can affect your existing debt. A quarter-point rate hike will boost the Annual Percentage Rate (APR) on your credit card, auto loan and any other debt with a variable interest rate. Try to tackle your most expensive debts before they get even pricier. You also might consider getting a balance transfer card of refinancing your auto loan if your current interest rates on these debts are making your payments unmanageable.
2. Have an adjustable-rate mortgage (ARM)? Consider refinancing to a fixed-rate loan
That ultra-low interest rate you’ve been enjoying on your five- or seven-year adjustable-rate mortgage can and will change. When you enter into an ARM, you’re taking a chance that rates at the end of that term will be about the same or possibly better than the rate you’re locked into for the initial rate term. However, with rates expected to rise, chances are slim that you’ll be paying the same or less every month when your rate term is complete. Mortgage rates are expected to rise in 2018 and likely exceed that number in 2019 and beyond. If you have a rate that’s a few percentage points higher when your initial term rate expires, that means your monthly payments could swell by several hundred or thousand dollars a month. The amount of interest you’ll pay over the life of the loan also will increase. Think about refinancing your mortgage into a fixed-rate loan before rates go higher*.
3. Don’t hold out for a price drop on the house you want
Considering making an offer on a home? You may or may not want to wait and see if the sellers will lower their price. According to the most recent report from the Federal Housing Finance Agency’s Home Price Index, home prices have continued a slow but steady climb. The number of available houses for sale nationwide is at its lowest level since the National Association of Realtors began tracking inventory in 1999. The scarcity of homes on the market means if you don’t pounce on the home you want, there’s a good chance it will sell to someone else.
And as always, don’t hesitate to call your personal PERL loan officer if you have any questions at all.
*Refinancing of your property is not a guaranty of loan approval.