If you’re like many people who keep an eye on interest rates, then you’ve probably noticed some changes the last few weeks. The slight rise in interest rates recently has got some people wondering what’s going on, but for us and those that study my methods it is a huge benefit.
The U.S. economy seems to be doing well. It’s strong in terms of rising wages and general growth. The population seems to be enjoying some stability in the stock market and property investments and we’d love things to keep moving as they are, but the Feds take such conditions as an indicator that inflation will rise. So, to offset rising inflation, the Federal Reserve increases interest rates.
How this affects mortgage loans
Currently, a 30-year fixed mortgage rate is around 4.4 percent, which is the highest it’s been in about four years.
This might not seem like it would make much of a difference, but let’s say you have a home loan that’s $240,000. At 3.66 percent, you’d be paying $1,099 per month. At 4.4 percent, you’d be paying $1,202 per month, which is an increase of over $37,000 over the term of the loan long-term.
Effects of rising interest rates
- Cost of borrowing increases. Rising interest rates may hinder some people from getting loans. Also, those who already have loans will have less spending money as they’ll have higher interest payments. This means overall consumption will decrease.
- Mortgage interest payments rise. Even a 0.5 percent interest rate hike can impact homeowners, causing their monthly payments to rise, giving them less discretionary income.
- Less people invest. When interest rates increase, less people will invest in the stock market and real estate.
What does this mean for property investors?
As a property investor, I keep my eyes on interest rates, but I don’t allow an increase to stop me from purchasing properties. Of course, I’ll take advantage of low interest rates as I expand my portfolio, but the majority of my rental purchases are done using My Unlimited Funding strategy.
This means that I don’t even have to go get a loan to purchase the property, as I buy them ‘Subject To’ the sellers existing loan. As interest rates rise, less people may invest the traditional way, but more people will get creative and purchase rental properties ‘Subject To’. It just makes sense and you won’t need a bunch of cash down either. You can buy a home with no money down, no loan in your name, and have monthly cash flow in no time.
Rising interest rates may come, and when they do know that it’s the time to start mining for gold using the methods I teach.