The combination of inflation, a growing GDP, and a sellers housing market, mortgage rates and housing prices are on the rise with no signs of slowing down. With homes flying off the lot, it can be tempting to finally grab a piece of the plot that everyone seemingly wants to be part of. As a future homeowner, you've probably wondered how to lock in the lowest rate.
Fixed Vs. Adjustable Rate Mortgages
Both types of mortgage rates have their advantages when it comes to homebuying and budgeting. A fixed mortgage rate will be fixed for the life of your home. If you receive a loan in 2022 at 4.25% APR over the length of 10 years, you will still be paying 4.25% in 2032.
With an Adjustable Rate Mortgage (often called Variable Rate or ARM), you will enjoy a lower rate than a fixed-rate mortgage, but only for a limited time. After a predefined length of time, the rate will reset based on particular benchmark (PRIME rate in the case of an ARM through FCFCU) combined with an additional amount called an ARM margin (defined by your loan and lender). The benchmark in which the adjustable rate fluctuates depends on various economic factors, but it could cause your rate after the introductory period to be lower than it was at start of your loan. ARMs can be a good option for buyers who do not intend on staying in the home for a long period of time.
The biggest benefit of a fixed rate mortgage over an adjustable is the ability to budget. Due to your loan staying at a single fixed interest rate for the entire life your loan, you will always know your monthly payment. You will never have to worry about rising interest rates or global economic shifts causing your monthly payments to balloon to unpayable proportions.
In short, locking in a fixed mortgage rate will allow you to better budget and plan for your future. Compared to adjustable mortgage rates, you will not have to worry about your interest fluctuating. Get a rate and enjoy it for the life of your loan.
60 Day Lock In
Locking in your mortgage rate keeps your loan safe from fluctuations in the mortgage. Your loan can take several weeks to process, and during that period, mortgage rates nationwide could fluctuate. However, when you go through First Commonwealth FCU for your mortgage needs, your fixed rate is locked in for 60 days.
Learning from Past Mortgage Rates
Unsure now is right time to lock in your loan? If you're holding out for pandemic level rates, you might want to reconsider. Based on economic and historic evidence, it looks like rates are on their way up for at least the remainder of the year. 1 Even with rising mortgage rates, they are still much lower than the average fixed rates of homes 15 years ago.
"Current mortgage interest rates are still very good from a long-term view, even if they’re breaking through the psychological barrier of 4%. Rates were well above 4% as recently as 2018 and 2019. Before the 2008 crash, a “good” rate was still above 5%.” 1
In fact, we have had record low rates for the past several years. Safe to say, there have been much worse times to lock in a rate. With the current economic forecast, it is much more likely interest rates go up rather than down. Combined with rising home prices due to demand outweighing supply, there may have never been a better time to lock in your mortgage rate. 2
Fixed Rate Mortgages Can Help Budget your Monthly Payment
FCFCU Offers a 60 Day Rate Lock
Your Fixed Rate is fixed for the entirety of your loan
Rates are still lower than their average 15 years ago