How Increasing Interest Rates Will Affect You

This week we had another increase in Federal interest rates, But
This isn’t unusual. There are small, incremental increases
every year. It’s easy to think this minuscule percentage Change
won’t have much effect, but do you know how these regular, small
increases can truly affect you? 

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If you're not familiar with federal interest rates, it's
important you know that the government adjusts interest rates as
a way to help control inflation. If it costs more to borrow
money, people don’t buy as much and there is less of a rise in
inflation. **Of course, inflation has a tangible effect on our
everyday lives so it makes sense that interest rate increases
will as well. **
Federal Increases And You

The first place you’ll notice these changes will be on your
credit cards. You’ll immediately notice an increase in your
interest rates as these are directly tied to the federal interest
rates. It will only be a small increase, not a huge spike, but
keep this in mind next time you swipe your card.


A place you may not expect to feel the effects of interest rate
increases is through your mortgage. If you have an
existing traditional mortgage then you don’t need to
worry. If you have a 30-year or even a 10-year mortgage,
you’re locked into your interest rate for that term. 


New mortgages, will be affected the most. You can expect these
rates to increase steadily, not just this year but over the
upcoming years. 
This shouldn’t be a surprise for you though and you can take
advantage of it!  Making The Most Of Your Mortgage

Right now, mortgage rates are the lowest they’ll most likely ever
be. In fact, rates haven’t been this low since the 1950s. On top
of that, we’re in the 3rd most competitive housing market in
measurable history. Homes will often go on the market one day and
be gone the next. 


It’s an excellent time to buy a house, but this fast-paced,
low-cost market is causing people to make quick, unwise decisions
as well. 


Recently, I had a young couple came in. They told me they were
interested in buying a home and their lender had suggested an
Adjustable Rate Mortgage. 


If you’re not familiar with ARMs, they’re essentially a
mortgage option that locks the homeowner into a deceptively
low-interest rate for 5 years and then adjusts the rate year by
year, usually aggressively. There is a great benefit to
ARMs as it lets homeowners purchase more home for their money and
if they don’t plan on living there for longer than five years,
they can move before the interest spikes. 


This couple was attracted to the ARM because they wanted a bigger
home and planned to have children in the next five years, so they
thought this was a great option. 
Here’s the problem: Life is unexpected. 

People often assume that whatever goal they have will
definitely come to fruition and they make big, potentially
dangerous decisions based on these assumptions _
. _ You may plan to have children in the next
five years and need a bigger house. You may also plan to still
have a job in five years. You may plan on everyone in your family
being happy and healthy in that time too. None of this is
guaranteed, though.


But with an ARM, you make large and expensive decisions that
could come back to bite you if everything doesn't pan out. Then
you’re stuck in a long-term mortgage with an outrageous and
unpredictable mortgage that can change from year to year based on
the federal interest rate. 
Interest Rates: Get 'Em While They're Low Here is the advice I
gave to this couple and, if you have children or grandchildren
looking to buy a home this is advice you can give them as well:
lock in the amazing interest rates available to you now.

Instead of an ARM, they could get a 30 year mortgage with the
guaranteed lowest interest rate in our lifetime, purchase a more
reasonable home and have the safety  this mortgage term
offers without making assumptions about their future. If they do
end up having kids in five years and need a larger house, that’s
great! **They can reevaluate at that time. If everything doesn’t
go as planned, they still have a low interest rate for as long as
they need it. **


When it comes down to it, the annual federal interest rate
increases will affect your way of living, if not this year then
in the upcoming years. There are ways, though, that you can take
advantage of these changes to help yourself and your family out
in the long-term.


If you’re unsure of how to make the best use of our
current low interest rates or you’re afraid of the effect
increases will have on your future, sign up for a free
consultation. We’ll take a comprehensive look at your
financial situation and ensure you make decisions that won’t hurt
your long-term happiness. 


See Why People Love More Than MoneyLearn How To Take Advantage Of
Increasing Interest Rates