Follow Patrick Linkedin Facebook
Email Patrick Email
Financial
Jan 2, 2017

How To Beat Rising Interest Rates

Sponsored Content provided by Patrick Stoy - Mortgage Consultant/Owner, Market Consulting Mortgage

It’s no secret that financial markets don’t like surprises.  

Unexpected changes and uncertainty can often lead to volatility and rapid fluctuations. The victory of Donald Trump was a stunner for everyone and a perfect example of this phenomenon, as it exerted an immediate and significant impact on interest rates and the stock market.    

Politics aside, I think most home buyers probably shared a collective, nonpartisan groan of dismay after finding out lenders had increased their conforming fixed rates for a 30-year loan between 0.375 percent and 0.5 percent in a mere matter of days.

This may not seem like a big difference, but even a small change can have a huge impact on purchasing power, as well as the amount of money a borrower ends up spending over the life of a loan. In a scenario with a loan amount of around $425,000, the difference between the monthly payments for a loan at 3.75 percent and a loan at 4.25 percent would be about $125 - more than $10,300 over the first seven years.

Not surprisingly, many people are experiencing a great deal of frustration about the potential for their monthly payment to climb so quickly. If I had to go out on a limb, I would say that part of the reason for the frustration is there is no easy explanation for why interest rates have shot up so fast. 

Many experts believe Donald Trump will reform the tax code and push through investments in our infrastructure in an effort to stimulate the economy. A growing economy would drive prices up across the board, creating an inflationary market environment.  The interest rates and fees associated with mortgages are tied to mortgage-backed securities, which in turn are designed to be closely aligned with the 10-year Treasury rate. When investors expect an inflationary market environment, interest rates and fees tend to rise because they want to know that their funds will be protected.

This may be a bit of an oversimplification, but the takeaway is there is a general consensus that interest rates are going to continue increasing over the near-term. So, how is it possible to save money when inflation is a factor and interest rates are rising?

An effective strategy for avoiding a higher monthly payment and overall cost could be to opt for an adjustable rate mortgage (ARM) instead of a conventional 30-year fixed. I know, Dad said to always go for the 30-year fixed rate. Considering it is generally possible to get a no-cost, seven-year ARM at approximately ½ percent lower than a 30-year fixed, with a lower credit score, it may be time to put that conventional wisdom aside.

As I mentioned above, half of a percent can make a substantial difference. Being able to save more than $10,000 over the first seven years before the rate adjusts sounds like a good thing to me.

Plus, there is no guarantee the rate will adjust upward at the end of the term, contrary to what the pessimists would have you believe. Many folks have told me that their ARM actually decreased after the first seven years.

Of course, there is no way to know the future with any degree of certainty. There is no strategy that works for everyone or a one-size-fits-all approach to assessing a borrower’s options for obtaining financing. A computer can tell you what you qualify for and the various loans available but it will not be able to help you figure out the best possible solution to fit your individual circumstances and needs.

For a consultation about the various loan options available to you, please contact me at the number below.   

Patrick Stoy (NMLS Numbers 39527 and 39166) has 16 years of mortgage lending experience. Patrick is CEO of Wilmington-based Market Consulting Mortgage, which he started in 2005 with a mission to build lifelong customer relationships by providing real value. To learn more about Marketing Consulting Mortgage, visit www.macmtg.com. Patrick can be reached at [email protected] or 910-509-7105.
 
 
 

Other Posts from Patrick Stoy

Mcm 14jan insight
Ico insights

INSIGHTS

SPONSORS' CONTENT
Untitleddesign2 9202334730

Best in the State: Providing Quality Care to Medicare and Medicaid Patients Allows Novant Health New Hanover Regional Medical Center to Reinvest in Community

Novant Health - New Hanover Regional Medical Center Novant Health
Dave sweyer 300 x 300

Insights into the 2023 Leasing Market in Wilmington, NC: What You Need to Know

Dave Sweyer - Sweyer Property Management
2022052 75 142344351

Bridging Futures: The Case for Toll Funding in Wilmington’s Cape Fear Memorial Bridge Revamp

Natalie English - Wilmington Chamber of Commerce

Trending News

Conservation Group Signs $8M Deal To Buy The Point On Topsail Island

Audrey Elsberry - Mar 26, 2024

National Organization Bestows Top Award On Cape Fear Professional Women In Building

Staff Reports - Mar 26, 2024

Engineering Firm Hires Four Employees

Staff Reports - Mar 26, 2024

N.C. Ports Officials React To Baltimore Bridge Collapse

Audrey Elsberry - Mar 26, 2024

NCino's Fourth-quarter Earnings Signal Rebound From Liquidity Crisis

Audrey Elsberry - Mar 27, 2024

In The Current Issue

INFO JUNKIE: Jack Fleming

Jack Fleming, owner of Socialry Marketing & Scourz and emcee for 1 Million Cups Wilmington, shares his media and tech picks....


Hacking Cyberdefense Shortage

A shortage of cybersecurity professionals influenced professor Ulku Clark and her team to slowly evolve UNCW’s offerings to now include eigh...


MADE: Polyhose Inc.

Polyhose manufactures and fabricates hose protection, paint hose assemblies and rubber hydraulic assemblies from its Pender County facility....

Book On Business

The 2024 WilmingtonBiz: Book on Business is an annual publication showcasing the Wilmington region as a center of business.

Order Your Copy Today!


Galleries

Videos

2023 Power Breakfast: Major Developments