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Can You Win The Mortgage Rate Guessing Game?

Written by on Monday, 14 September 2015 2:04 pm
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The question is no longer "Will interest rates increase?," but "When?"

As I write this column, the ongoing "Will it? Won't it?" debate about when the Fed will raise interest rates continues, however, for individual real estate owners and buyers, the important question is, "So what?"

What would higher interest rates mean to you and your real estate ownership plans?

If rates plod up gradually over months, even years, would this have the same affect on your financial future as if rates jump up significantly over shorter time frames?

If your plans include the purchase or sale of property, how would increased rates impact your goals?

If you're in your "forever home" and faced with mortgage renewal in a few years, how tolerant of a significant rate increase will you be?

Would your non-mortgage debt load make you financially vulnerable as interest rates climb?

Which other mortgage-contract features like prepayment options and amortization period may offset or override fractional differences in interest rate in your situation?

Would there be any financial advantages in waiting for higher interest rates?

If your strategy is to wait until rates definitely start to increase before you deal with issues like those above, you may end up on a very bumpy financial road. Listening to or following media hype may increase your stress levels, but it won't necessarily prepare you to take sensible financially-sustainable action. Your choice? Tackle interest-related issues now, on your own schedule, or delay until big decisions are forced on you. 

You are above average if you answered all or most of the above bullet questions regarding your personal finance and future. Give yourself a pat on the back if you are working on answers to these questions with licensed professionals who spend their careers helping consumers uncover answers and alternatives for these and other financial planning issues. Loan officers, real estate professionals, and financial advisers are among those who can help you determine the impact of higher interest rates on your finances and future before the fact.

Raise your personal financial literacy level by learning the language and basic principles of finance. This will enable you to understand and retain even more from the professionals you talk to and the material you read. You'll also be better prepared to ask questions to determine who can genuinely help and who may con you.

One online financial-literacy starting place is MyMoney.gov, the national financial education website overseen by The Financial Literacy and Education Commission, comprised of the heads of 21 federal agencies including the Consumer Financial Protection Bureau and the Departments of Education, Agriculture, Defense, Health and Human Services, Housing and Urban Development, Labor, and Veterans Affairs.

MyMoney.gov is divided into 5 categories: spend, earn, save & invest, protect, and borrow. For instance, under borrow is this tip: "You are entitled to a free copy of your credit report every 12 months from each of the three nationwide credit bureaus. Go to www.AnnualCreditReport.com or call toll free 1-877-322-8228 to order the free reports. Beware of imposter sites."

Take action to learn how to protect your finances before interest rates change and you have fewer or no choices. This is the first step toward ensuring you're on solid footing when interest rates hit new levels.

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  About the author, PJ Wade

Individual news stories are based upon the opinions of the writer and does not reflect the opinion of Realty Times.