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.