As Interest Rates Rise, Protect Your Adjustable Rate Florida Home Loans

While the current housing market may seem confusing to buyers and sellers, one thing is for certain: Florida home loan rates continue to rise. With that in mind, here are some to protect yourself against increasing rates on your ARM.

1. Know the stakes
Simply put, rising interest rates mean ballooning payments. Because ARMs make up about 25 percent of mortgages, it may pose a widespread problem.

This year, for example, it’s estimated that $330 billion worth of ARMs will adjust upward. Therefore, it’s important to have an understanding of where you adjustable rate Florida home loan stands.

2. Buy some time
If you have a quick-changing mortgage, like an option ARM, you’ll want to think about refinancing. The days of cheap money are over, says Brad Inman of Inman News.

To buy some time, get into a 5-year or a 7-year hybrid adjustable rate. How come? Because the average rate on an option ARM today is 6.75 percent - but rates on 5-year or 7-year hybrid ARMs are 6 percent to 6.25 percent.

You’ll want to go back to your original lender and tell them you want a safer mortgage. Make sure you also look at the cost of Florida home loan refinancing. Generally it costs about a percentage-point or a percentage-point and a half of your original loan.

3. Re-Evaluate your Home Equity Line of Credit
Three years ago, HELOCs were the darlings of people wanting to make some home improvements. But that was before rates sky-rocketed. Today HELOCs are very costly - and they’re slated to get even more expensive if the Fed follows through with another rate hike this month.

If you can, refinance into a single 30-year fixed Florida home mortgage loan. This will eliminate all uncertainty with the fate of future rates. You can also ask your lender about some other HELOC products that have fixed rates for a certain amount of time.

4. Don’t Consolidate
Americans spend most of their money on their homes and their cars. You don’t want to consolidate all of your other debts (credit card and student loans, for example) into your mortgage because it stretches out the life of your loan and makes it more expensive in the long run.

Think about it: You don’t want to be using a 30-year mortgage to be paying off a car that’s going to last six years.

5. Forget the fees
Make extra sure you’re not paying more than you need to every month. Re-evaluate your Private Mortgage Insurance payments. You’re probably paying this monthly fee if you put less than 20% down on your home.

If you took out your Florida home loan after July 1998 and you have paid off about 22% of the loan already, your lender must cancel your PMI payments. But it’s up to you to go to your lender and prove your gains.

Even as rates rise, there are steps you can take to protect yourself and your Florida home mortgage loan from losing too much money. Apply today and confer with our specialists.