The Fed released its long-awaited interest rate hike, which affects both fixed-rate and adjustable-rate mortgage products. Meanwhile, learn about refinancing second homes and investment properties, and explore best practices for renovating backyards and choosing a new construction home.
1. The Fed and mortgage rates
Following its March meeting, the Fed announced a quarter-percent increase in the federal funds rate, which fixes borrowing costs for short-term loans in the United States. This change could move the rate on 10-year Treasury bills, which influences what consumers pay when they take out mortgages or other types of loans. The Fed’s latest move is likely to push mortgage rates up, making it all the more important to look for a rate that best suits your goals.
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2. The impact of the Fed on home loans, HELOCs and ARMs
Variable Rate Mortgage (ARM) rates will increase at the next reset if the Federal Funds rate increases, although there are several caps on the amount of interest you may be liable for. Home equity and HELOC borrowers typically also have variable interest rates, which means Fed decisions will impact not only your monthly costs, but the amount you pay for your loan as a whole. .
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3. Refinancing a second home or an investment property
Refinancing is more complicated for those who own multiple properties. Lenders consider second homes and investment properties to be riskier because the borrower does not rely on them to keep a roof over their head, so they generally issue higher interest rates on these loans. Some lenders will turn away from these refinances altogether. Higher rates mean it will take longer to recoup your closing costs, so be aware of the break-even point and look for the best rates.
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4. Garden Makeover Best Practices
It is important to weigh the value of a garden renovation against its cost. Simple steps like lawn maintenance can give you a better return on your investment than labor-intensive renovations with expensive materials. Plus, features like patios and fire pits can create a nice ambiance that can help you sell your home faster. If you’re going to go for a more expensive project, consider financing with a home equity loan or home equity line of credit (HELOC) to avoid the high interest rates of alternatives like credit cards.
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5. Choose a new house
Buying a newly built home has many advantages. Your home will look brand new, which means it will be energy efficient and low maintenance. Plus, you’ll be able to customize the space more than you would in an older home. That said, buying or building a new build is time-consuming and expensive, and you may find yourself exhausted from the many decisions you’ll have to make along the way. If you choose to buy a new home, you will need to ask thorough questions to find a builder you can trust.
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