Interest rates are changing, does that mean that now is the time to refinance your mortgage?
What factors impact your mortgage rates
Your mortgage rate is determined mostly by a handful of factors:
- How big your down payment is
- What your credit score is
- The loan amount you’re asking for
- If you’re going for a 15 or 30 year term
- The homes location
- Whether you’re getting a fixed or adjustable rate
- If the loan is a conventional loan or FHA/USDA/VA
The mortgage lender takes a combination of all of these factors to give you the best interest rate they can. If any of these factors change, or you need to change them, refinancing your loan will likely lead to a lower interest rate, and more money in your pocket every day.
The Federal Reserve changes mortgage rates
While small adjustments in interest rates are completely normal, the larger shift we’re seeing in them now is more related to the adjustments being made to interest rates everywhere. We can see the biggest change come when the Federal Reserve changes the Federal Funds Rate. The Federal Funds Rate is the interest rate the FR sets for bank to bank overnight loans to meet their Reserve requirements. During periods of inflation the Fed raises the Federal Funds Rate as a way of stemming the problem. This interest rate may not affect mortgage interest rates directly, banks use this number as a baseline for the interest rates they charge customers. Right now the Federal Reserve is increasing this rate.
For mortgages with an adjustable mortgage rate this means that the monthly payments are more than likely going to be going up by a notable amount.
What can you do?
If you’re a first time buyer looking at getting your mortgage and intimidated by interest rates, the best thing you can do is to get your credit score as high as you can and build as much of a savings as possible for your down payment. These are the two biggest factors that you can use to alter what interest rate you are going to get.
But, if you’re already in a home, and need to revisit the terms of your mortgage loan, the best way to do that is to look at refinancing. Anytime you purchase property or refinance your mortgage on a home in Georgia requires a licensed real estate attorney present at closing. If you’re taking steps to close on your house in the next 30-60 days give us a call! At Frank B. Pallotta Law we are licensed Real Estate Lawyers with 20 years of experience helping our clients in Georgia navigate the closing process. Reach out to us with your questions. We’re here to help.