If you're like many others that have seen the recent news that the fed just raised interest rates, you're probably scratching your head trying to figure out what exactly that means. Below is a summary of what is going on and how to prepare for the coming changes..
In December of 2016, the federal reserve raised key interest rates another quarter of a percent from 0.25% - 0.50% to 0.50-0.75% with an anticipation of further increases in 2017.
So what does this mean for you as a homeowner, new home buyer or real estate investor?
For Homeowners it can mean higher yields on your savings accounts, CDs, among other things, but as far as your home, here's what you can expect:
If you own your home and have an Adjustable Rate Mortgage (ARM) this means that you can expect a higher monthly mortgage payment.
If you are a new homebuyer or are looking to purchase, you can expect the price of financing a home to increase marginally. So in other words, adjust your budget accordingly.
For Real Estate Investors, this means either one of two things:
A. More opportunities to purchase
As home prices go up, more owners look to sell their homes to rid them of the financial burden, sometimes leading to more short sales. Unfortunately, this also means that more homeowners will not be able to afford this increase, and will lead to more foreclosures and foreclosure sales.
B. Lending will change
If you as an investor use traditional financing to purchase or refinance your projects, you may want to adjust your budget to include higher financing costs.
Also, take into consideration that it may take a little longer to flip that home or get someone to purchase as demand from buyers may decline due to the increased financing costs.
There's tons of information on interest rate hikes; these mentioned above are only a few. Be sure to do your due diligence before purchasing a home or investment property.