Your lender is trying to convince you that you need to apply for a refinancing mortgage so that you can transfer to a fixed interest mortgage rate. According to your lender, you have to take this action if you wish to be free from the capricious shifts of the market rates. But how is your mortgage affected by the economy?
Determinants of Interest Rates
As with everything in the market, your mortgage interest rates are determined by the interaction of supply and demand. When borrowing is up and the economy is strong, interest rates increase. When borrowing is down and the economy is soft, interest rates decrease.
But it’s not only the market forces that are setting the stage. There is also the Federal Reserve. Whatever the Feds do and wherever they set the fed funds play a crucial role.
The Federal Funds Rate
Now what is a federal funds rate? Also called the fed funds rate, this is the interest rate that is charged whenever banks lend funds to other banks. The rate’s maturity lasts for only two years or less, which makes it the short-term type. The behavior of the federal funds rate affects short-term interest mortgage rates.
As simple economic laws would have it, when short-term rates decrease, borrowing and spending are likely to increase. The result is inflation and the Federal Reserve tries to avoid this.
As for long-term interest rates, these are rates that last for ten years or more in terms of maturity. Short-term rates influence them indirectly. They typically rise when attempts to assuage inflation come into play. When inflation is increasing to undesirable heights, the Fed tries to remedy the situation by increasing short-term mortgage interest rates. People whose finances are gravely affected by market movements of interest rates are forced to consider alternatives.
Heed Your Lender’s Advice and Grab that Refinancing Mortgage
Your lender may be right after all. Maybe you do need that refinancing mortgage. All these talks about mortgage rates are Greek to you and the last thing you need is to have to watch over them if only to keep up with your refinancing mortgage payments. Maybe that adjustable mortgage rate you’re in right now is just not cut for you.
The Difference Between an Adjustable Interest Mortgage Rate and a Fixed Interest Mortgage Rate
By the way, do you already know what an adjustable interest rate is? How does it differ from a fixed interest mortgage rate? An adjustable rate is the type of interest rate that is subject to the changes in the market. This means that you may suddenly find yourself dealing with an unexpectedly high interest rate because of changes in the economy.
A fixed interest rate, on the other hand, is the type that is unchanged by the market trend. It remains the same no matter what shifts occur in the economy. It is more stable and more predictable.
Go on ahead and heed your lender’s advice. Grab that refinancing mortgage while the offer’s still up.
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Help answer the question about refinancing mortgage
What's the difference between home loan modification and mortgage refinancing?home loan modification vs mortgage refinancing, are they the same thing?
I've worked in finance for over 20 years(part of that time in mortgage) and anytime the company is with the bbb you can be 1000000% reassured that it is a legitamite company. It is actually highly unlikely to have any problems with a mortgage company and about 90% of major problems come from large companies. So I would not worry.
First I do not care how desperate a company is you screwing them out of a substantial amount of money is not going to make them want to lend you even more.
Second the rental is a disaster in waiting for you. Let's play what if, and do not dismiss my scenario it happens all the time, what if you can not rent the unit, what if you rent and the tenants destroy the property and leave after 9 or 10 months, what if the tenant simply leaves in the middle of the night, is sporatic about paying rents…any of these scenarios means YOU can not pay your OWN mortgage payment.
You can not even do deed in lieu or short sales unless you are behind in the payments, then if you get behind so you can your credit is ruined.
When one is as desperate as you are one makes a lot of costly mistakes.
Stay put and save money like crazy for a year.I know not in your vocabulary.
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interest rates, refinancing options, mortgage lenders, loan comparrisons, credit ratings…..there’s a lot to consider
Forunately however help is at hand
mortgageartist. com
helps you find all this and more.
The best thing you can do is arm yourself with knowledge, even better if it’s free. a little time and a few clicks now could save you years and thousands of dollars later.
the choices you make today define your tommorow.
Check out Life lessons for all ages, the average home loan will make you pay way too much in interest!