The days of historically low interest rates are over, at least for the foreseeable future. Since the election, we’ve seen a gradual uptick. According to MarketWatch, rates on the popular 30-year fixed-rate loan are hovering around 4 percent. If you anticipate shopping for a mortgage in 2017, the forecasters say you can expect an interest rate between 4 and 4.5 percent, depending on your credit score, the loan program you’re using and your financial stability.
The good news
Even with higher interest rates, real estate continues to be a sound investment, provided you can afford the higher monthly premium caused by the higher rate. Depending on the size of your loan, a rate bump of half a percent generally means another $75 to $80 tacked onto your monthly premium.
Is refinancing still a wise move?
The pros at MarketWatch advise that refinancing in order to lower your interest rate might not be the best option right now. There are other reasons, however, to consider a refinance:
Cash-out refinancing: When mortgage rates rise, the interest on credit card debt, student loans and lines of credit typically goes up as well. Cash-out refinancing can be a helpful strategy for getting rid of high payments generally associated with consumer debt. From MarketWatch: For example, if you can pull out $20,000 in a cash-out refinance and use that money to pay off your larger outstanding debts (i.e. car loan, student loan, credit cards, furniture), your mortgage payment may rise by $100 a month, but you’ll save $600 a month in obligatory debt. You can then take that extra $500 and save that money or pay down your mortgage principal.
Shorten the term of your loan: You can greatly reduce the amount of interest you’ll pay over the duration of your mortgage by reducing the term of the loan. Rather than a 30-year term, opt for a 15- or 10-year fixed-rate mortgage if you can swing it and save substantial amounts of interest. Currently 10- and 15-year fixed-rate mortgages are hovering in the mid-to-low 3 percent range.
Experts are saying that if the stock market continues to make the kinds of gains we’ve seen during the first month of 2017, we can expect mortgage rates to continue to rise. If you’re in the market for a new home and find one you like, the advice is to act quickly and lock in your rate.