Good Ideas for Times of Rising Mortgage Rates | St. Johns Bank

If you’re following news about mortgage rates, you’ve likely heard the months of record-low rates may be giving way.

The numbers started rising in February and are now above 3% for 30-year loans for the first time since the fall.

The increases aren’t a surprise; experts predicted a rise this year, though they may not have seen how quickly it would move this early in the year. But they’re certainly likely to be unwelcome news for those who didn’t get in on the housing market boom of the last year.

If that includes you, here are some things you can do now to take advantage of rates that remain at what would have been unthinkable lows not too long ago.

Traditional Loans

Fixed-rate 15- or 30-year mortgages are a great way to enjoy long-term benefit from the current rates. They remain the best and most-popular option for most homebuyers, particularly those who plan to stay in their homes for a long time.

Unlike adjustable-rate mortgages (ARM), traditional loans don’t carry the risk you’ll face increases as the market recovers as it’s expected to. With a fixed-rate mortgage, you’ll be able to enjoy the benefits of today’s incredibly low rates over the life of the debt. That can mean big savings over the next 15 or 30 years.

Low rates shouldn’t be the only motivator; you need to be sure you’re ready to buy a home, including being in a good financial position for it. If you are and you’re already planning to buy a place, taking advantage of the rates with a fixed-rate loan can be a great way to save money as you do.

Adjustable-rate Mortgages

One benefit of ARM loans is their initial rates are typically lower than what’s available with traditional loans. Some of that has been erased in the last year as the two numbers came much closer together as rates for fixed-rate mortgages fell so far.

Still, they can offer potential for savings for borrowers who either don’t mind taking the risk the rate will go up or plan to sell the home before the initial rate is re-evaluated.

If you’re looking to buy with an ARM right now, you may want to consider one with a longer period for the initial rate, since it could mean you have longer to enjoy today’s low numbers. If you already have an ARM, hopefully you’ve been able to enjoy the low rates.

Regardless of whether your loan is new or old, one great idea for times when the rate is low is paying more than the required payment each month. Since the total payment should be lower thanks to the lower interest rates, it should be easier to pay more than you have to, which can help you get ahead on the principal.

Doing that can give you a leg up if rates rise because you’ll be charged that new, higher interest rate on a smaller total amount, which means you won’t pay as much interest as you would have otherwise. That can save you money over the life of the loan and can make your monthly payments more manageable.

If you’re in the market to buy a place, let the mortgage experts at St. Johns Bank help you find the perfect loan and walk with you through every step of the process. Call us today to get started!