Mortgage Rates - stay short or go long term?

    Home owners should plan for the eventuality that interest rates will increase. How do you do that? The easiest solution is to lock into a long term mortgage rate. The more difficult solution is to take advantage of today's low rates in a variable rate mortgage but plan for higher interest rates down the road.

     If you take the easy way out, you can lock into a 10-year mortgage rate at 5.35%,or you could even choose a 25-year term with a fixed rate at 6.00%. If you talk to anyone who has had a mortgage over the last 30 years, they would have been happy to have paid these low rates!

     If you're convinced that interest rates will remain low you can still choose a variable rate mortgage, but make sure your budget will allow for you to make significantly higher payments in the future if interest rates rise.

     A great option is to increase your mortgage payments to an amount equal to what you would pay if interest rates were 2% or 3% higher. This way you are paying down your principal much quicker when interest rates are low and will not be shocked by higher payments in the future. Be careful though, not all variable rate mortgages are created equal. As always, check the details, before committing to a long term plan.

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