Interest rates are on the rise, and I want to make sure you’re prepared to know what this means for your mortgage. We all want the lowest rate possible to have extra money to spend on food, entertainment, or a vacation. But, when it comes to interest rates and mortgages why bother spending extra money on your mortgage when you don’t have to? Generally speaking, it’s expected the overnight rate will hit around 2.75% by the end of the year. And, this is what you need to know…
Why are interest rates increasing now?
One of the biggest reasons is to tame inflation, which grew 6.8% annually in April 2022, the highest rate since 1991.
How does this impact your ability to get pre-approved for a mortgage?
With higher interest rates, it can be challenging for people to qualify for a mortgage. You must pass the stress test, which ensures that if interest rates increased (even more) you could still afford your mortgage. If you have already been struggling to pass the stress test recently when interest rates were lower this might mean you need to restrategize your home buying plan.
I can’t talk enough about how getting pre-approved is one of the most important steps to take to ensure you get the lowest mortgage rate possible. With rates on the rise, it makes sense to get pre-approved now so you can lock in a lower rate if you’re planning to buy in the next 90 days. A mortgage broker, like myself, Darren Robinson, does all the heavy lifting for you. I work with multiple lenders to find you the lowest interest rate with the best mortgage options. I also help you with your application, making sure all the documents you need to have prepared are taken care of, and if you need to fix up a few areas of your application I make sure we do what’s needed before submitting your application to give you the best shot possible at securing the mortgage you need.
There are many government initiatives for first-time home buyers to look into as well that can help you save money when buying your first home. Check out my article here for the lowdown if you’re a first-time buyer.
Should you refinance your mortgage?
Well, the simple answer is if interest rates are increasing… then it may not be the best option for you. However, it doesn’t hurt to take a look to see if there is a better rate out there for you. You don’t always have to go with a bank, whose interest rates go along with the market and will be increasing soon. Private lenders at times can be great solutions when looking for a lower mortgage rate depending on your situation. Ask your mortgage broker if they have lenders that can offer you a lower rate. We have much more selection than the banks do.
Variable or fixed mortgage rate?
Because interest rates are increasing, you need to know that a variable mortgage rate will fluctuate depending on interest rates. This means you are likely going to see a considerable lift in your regular mortgage payments as rates increase if you currently have a variable-rate mortgage. However, a fixed mortgage rate will stay the same amount during your mortgage term. If you currently have a variable mortgage rate it may be worth looking into switching to a fixed mortgage rate with the increases we are expecting.
Mortgage brokers get paid by the mortgage provider, so my job is to find you the best mortgage solution while helping you navigate your options, while also helping save money — All without charging you a nickel for it. When it comes to navigating the crazy world of mortgages, I am your guide. As a reputable mortgage broker and financial advisor in Barrie, I can help you find the best mortgage rates possible while ensuring you are thinking through all your options to make an informed decision. Contact me today at 705-315-0516, and let’s set up a meeting to talk about your plans and how I can help you secure the mortgage you need.