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How to Deal with the Impact of Rising Mortgage Interest Rates

Brady Webb
September 23, 2024

As interest rates continue to rise, many homeowners are wondering how this will impact their mortgage costs. We’ve all heard horror stories about people who’ve seen their monthly payments double or even triple overnight, but is this really something we need to be worried about?

A mortgage’s interest rate dictates its monthly payments and the total cost over the life of the loan. Obviously, the lower the interest rate, the less you’ll pay in interest, which makes for lower monthly payments.

As an example, when your current interest rate of 3.5 percent jumps to 5.51 percent, it can result in a higher payment of $2,013.58 out of your $300,000 mortgage. While it may seem like a minor inconvenience to your wallets, the numbers can quickly add up, leading to a whopping $613,889.90 in principal and interest.

Dealing with the Rising Interest Rates

Rising interest rates can have a significant impact on your monthly mortgage payments. If you’re not prepared, the increased costs can really add up and put a strain on your budget. However, there are ways to save money and survive interest rate spikes. Here are a few tips:

Get pre-approved for a mortgage. This will give you a clear idea of how much you can afford to spend on a home and can help you lock in a lower interest rate.
Shop around for the best mortgage rate. Don’t just accept the first offer you get. Compare rates from a variety of lenders to make sure you’re getting the best deal.
Consider a shorter-term mortgage. If you can afford the higher monthly payments, a shorter-term mortgage will save you money in the long run.
Make a larger down payment. Higher down payment will lower your monthly payments and help you avoid private mortgage insurance (PMI).
Keep your credit score high. A higher credit score will help you qualify for a lower interest rate.
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With these tips in mind, you can still find ways to manage rising interest rates and get into the home you want.

Apply For a Mortgage Today at American Mortgage Solutions

The Federal Reserve’s primary tool for controlling inflation is the interest rate, and when they raise rates, it affects everything from savings accounts to mortgages. A 0.25 percent interest rate hike might not sound like much, but it can have a significant impact on your monthly mortgage payment.

Of course, the interest rate is just one factor that determines your mortgage payment. The term of your loan, the type of loan, and your credit score will all play a role. But if you’re in the market for a new home or looking to refinance, it’s important to keep the Fed’s interest rate hikes in mind.

The Bottom Line

The rising interest rates have been a hot topic lately. If you’re worried about rising interest rates, there are plenty of solutions that can help you stay afloat. Talk to your lender or financial advisor to discuss your options and find the best solution for you.

Apply For a Mortgage Today at American Mortgage Solutions

American Mortgage Solutions helps individuals find the right financial solution they need to fulfill their homeownership dreams. If you are looking for a mortgage broker in Louisville, KY, Contact us today at (502) 327-9770 for Louisville KY Office and for Cape Coral FL Office (239) 766-8344.

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