While he was campaigning, Donald Trump made some forceful comments about interest rates and real estate. Now that he’s been elected, his comments have taken on a whole different level of importance, since they can have a huge impact on homeowners and their mortgages.
So what exactly did he say, what does it mean, and most importantly, what can we do as homeowners to protect ourselves?
What Did Trump Say?
-- “Everybody says (Fed Chairwoman Yellen) should raise interest rates.”
“Keeping these interest rates at this level… this is a political thing”
-- “I’m just saying at some point, you have to raise interest rates.”
-- “When they get raised… you’re going to see some bad things happen.”
What Does it Mean?
So with Trump’s warnings in mind, how has the market reacted since his election? Well, rates have clearly started to rise.
What Can You Do To Protect Yourself?
1. If you haven’t refinanced to today’s low rates, this may be last call.
If you’ve put off refinancing your home, this may be your last window of opportunity before rates really start rising. Rates are still at extremely low levels, but those who fail to lock them in may be kicking themselves in a few months.
Check to see if you could save by refinancing >
2. If you have a variable rate mortgage, be careful:
Get out of variable rate loans: the last time rates really started rising, variable rates hit a stunning 18.5%, and people lost their homes. There’s no reason to keep playing chicken with rates by staying in a variable mortgage, especially since 15 and 30-year fixed rates are still so low. Is it worth risking your home to save less than half a point on your rate?
See how low your fixed rate could be >
3. If you have student loans or credit card balances, consider refinancing:
Many people may not realize that their homes have appreciated quite a bit over the last few years, and that it's possible to convert that appreciation into cash by performing a "cash out refinancing". You can check with lenders to see how much your home has risen, then refinance into a larger mortgage (potentially even at a lower rate) and keep the difference in cash. An additional benefit is that the interest on your mortgage is tax deductible while that on cards (and usually on student loans) is not, resulting in even further savings by using this tactic.
See how much money you could get by refinancing >