What Does Higher Interest Rates Mean For You?

This has been the most debated and frequently asked question I have been getting recently from clients and rightfully so. The reason I wanted to tackle this topic today is not for those who ask this question but for those who don't. I see many people who have put their plans to Purchase a new home or Refinance an existing one on the back burner, believing that the present interest rate environment has eroded their ability to do something or that it no longer makes sense. So I thought we would take a look into the matter a little bit deeper with some real world examples.

The historic low interest rates bottomed out in the last 12 mos. period right around 3.5% for a 30 Yr. fixed rate and that rate stands at 4.49% as of today. Let's say you are looking to purchase or refinance a home with $300,000 mortgage amount. That means that your monthly mortgage payment would cost you $171.14 more a month today than from the lows. On the surface that would seem to be a relatively large number however there are a couple things that we need to look at to go beyond just the dollars and cents of mortgage payments. For example many new home buyers neglect to talk to one person in the home buying process and that is their tax professional. I suggest touching base with your tax pro. to see how the mortgage interest and property taxes on your new mortgage loan will impact the amount of your income tax savings and also to go over any adjustments you may be able to make to different areas of withholding. The tax implications alone may come close to offsetting the payment difference. If you currently don't own a home and are looking to purchase your first home then you really want to talk to your tax pro because the amount of tax benefits toward income tax savings can be incredibly eye opening.

If you are looking to refinance I also suggest talking to your tax pro. but also look to include non deductible debt such as high interest rate credit cards or unstable debt like home equity lines of credit where interest rates are likely to rise pretty dramatically in the future. I know many people consider credit card debt short term, however if you are making minimum monthly payments your credit card debt could be around longer than your mortgage.

Also look to refinance to a term that makes sense for you. You may want to look at a shorter term mortgage like a 25, 20, 1f or even a 10 Year loan. The interest savings over the life of the loan can be enormous compared to an existing 30 Yr. fixed rate.

Every individual situation is a unique one and I encourage you to give me a call to discuss your particular needs. After over 23 years industry experience 2014 affords some of the best opportunity to get something going.

Frank Monetti 

Vice President-Sales

Mortgage Capital Associates, Inc., NMLS 263724

cell: 908.513.1202

email | TheMonettiGroup@Gmail.com

website: WWW.TheMonettiGroup.com