Protect Yourself From
Unexpected Mortgage Loan Adjustments
If you're facing an
upcoming rate change on your adjustable rate mortgage, you may be a bit
worried. The Federal Reserve's recent credit tightening in the last period has
meant that interest rates, especially short-term rates, have risen
dramatically. This may mean that your
new monthly payments will be much higher than you may have expected or budgeted
for. So what can you do if you find
yourself in this situation, and what can you do to prevent yourself from losing
your home if you do?
Time To Consider A New
Loan Option
Given the unstable
financial climate, and to protect yourself in general from huge fluctuations in
your mortgage payments, choosing a fixed rate loan may be the best option for
you. This means that your monthly payments
are fixed at a certain amount for the period you negotiate and, if your budget
can't handle the wild swings in the market, this may be a better choice. While historically fixed rates are higher
than a mortgage with a fluctuating rate, given the instability of the current
markets and the overall low rates, this may be the time to make the switch.
Combining The Benefits Of
A Fixed And Adjustable Rate
Another option that should
also be considered, especially if you plan on staying in your home for less
than 10 years, is to refinance into a “hybrid” ARM loan. This type of loan offers you a fixed rate for
the initial period of your loan. This
gives you protection from rising rates as long as you need it, and still gives
you the flexibility to take advantage of an adjustable rate when things pick
up.
Whatever you decide,
getting the advice of a financial advisor will help you protect your greatest
investment. No matter what your current
or long-term outlook, there are always options to refinance your home that can
ease your financial stress and keep you in your home at the same time. Knowing what the markets are doing and
seeking the advice of professionals will help you do just that.
