January 14th, 2017 9:42 AM by Christopher Terry
Out with the old and in with the new. New Years brings a fresh start to many aspects of our lives, but some of those new beginnings might not be for the best. In December of 2016, The Federal Reserve increased interest on mortgage rates by 0.25%. The 30-year-fixed mortgage rates also already increased by 0.5% between the presidential election and the December Fed meeting, and will likely continue to climb well into 2017.
Though a 0.25% increase doesn’t sound like much, it can cost homeowners thousands of dollars more over time. For example, homeowners with a 30-year mortgage of $300,000 with a 4% rate will have monthly mortgage payments of 1,578. If that rate goes up by as a little as 0.25% the monthly payments will be $41 dollars higher; a total of $14,760 over the course of the 30-year loan.
Buyers shouldn’t let small increases scare them from buying a home. Here are some precautions homebuyers can take to save money in the long run.
First-Time Homebuyers
First-time homebuyers might want to consider reducing their target price as the mortgage rates inch up. In order to ensure long-term affordability, homebuyers might think about looking at smaller homes or home with fewer wish-list traits. Another option is delaying the home buying process, and taking the time to save up for a more expensive property.
First-time buyers should also try improving their credit score, because the better the score, the lower the interest rate will be. They should also check their credit reports for errors, try to reduce their debt, and save up as much as possible to put on their down payment.
Repeat Homebuyers
Current homeowners who are looking to move, might be a bit shocked to see the difference in monthly costs between their current mortgage and their new one. There are things that can be done though to minimize the financial impact of a move. Doing your research on the cost of living in different communities can help, as well as starting the process of moving sooner rather than later.
Current Homebuyers
If you are currently living in the home you want to live in for a while, look into refinancing to a fixed-mortgage rate before the rates increase too much.
It is impossible to predict what mortgage rates will look like throughout 2017, but by doing your research and covering all bases, you can save yourself thousands of dollars in the long run. Christopher Terry is a licensed real estate broker in Ma and RI, has completed the Accredited Buyer Representative Certification, is a graduate of the Certified Distressed Property Institute, holds the prestigious CDPE designation, is a 4-Time winner of the Master Sales Society's 5/50 Award and is the founder of EZ Home Search Real Estate Inc.