Interest rates are changing; does that mean it’s 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.
There are more reasons to refinance your home on top of a lower interest rate, here’s five big ones.
The Federal Reserve changes mortgage rates
While small adjustments in interest rates are completely normal, the larger shift we’re seeing now is more closely tied to the rate adjustments being made everywhere. We can see the biggest change comes when the Federal Reserve changes the Federal Funds Rate. The Federal Funds Rate is the interest rate the FR sets for banks to borrow from other banks for overnight loans to meet their Reserve requirements. During periods of inflation, the Fed raises the Federal Funds Rate to stem inflation. This interest rate may not affect mortgage rates directly, but banks use it as a baseline for the 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.
Wondering if refinancing might solve some issues with your mortgage?
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 buffer as possible for your down payment. These are the two biggest factors you can use to determine the interest rate you will get.
But if you’re already in a home and need to revisit the terms of your mortgage, the best way to do so is to consider refinancing. Anytime you purchase property or refinance your mortgage on a home in Georgia, a licensed real estate attorney must be present at closing. If you’re taking steps to close on your house in the next 30-60 days, give us a call! Reach out to us with your questions. We’re here to help.
