Current Mortgage Refinance Rate - What Do Rising Rates Mean for Your Loan

Rising interest rates have been a frequent topic in the news this year. Many homeowners are concerned how higher interest rates will impact their mortgage payments. Will recent rate hikes make your payments go up? Here are several tips to help you decide if mortgage refinancing would be beneficial before your payments rise too much.

If your mortgage comes with an adjustable interest rate the lender will reset your loan at regular intervals specified in your loan contract. Most adjustable rate mortgages come with an introductory interest rate significantly lower than your loans actual rate. At the end of the introductory period your lender will adjust the monthly payment to include the actual interest rate and the payment will go up. Many homeowners with adjustable rate mortgages do not understand how the loans work and find themselves unable to manage the payments.

Fixed Interest Rate Loans

Traditional mortgages are 30 year loans that come with a fixed interest rate. While you may not save money with a fixed interest rate loan, having predictable monthly payments you can plan your budget around is a definite advantage.

Hybrid Adjustable Rate Mortgages

Hybrid loans allow borrowers to take advantage of lower adjustable interest rates. These loans feature a fixed introductory interest rate for a set period of time and annual adjustments every year after that. These loans are designated by two numbers. A 5/1 hybrid mortgage for instance has a fixed interest rate for 5 years and will be adjusted each year after that. Other common hybrids include 1/1, and 7/1 loans. If you plan on only staying in the home for a few years, choosing a hybrid loan allows you to take advantage of lower adjustable interest rates while having the stability of a fixed loan.

You can learn more about your mortgage refinancing options, including common mistakes to avoid by registering for a free mortgage guidebook.