Rising Interest Rates

Well, even if we're not house-hunting anymore, there is still the impending need to re-negotiate our mortgage. It comes up in November.

Meanwhile, interest rates are rising. It's true that they aren't rising quickly and they aren't leaping up large amounts when they do go up. But still, they are rising.

What's the best deal in a rising interest market? Lock in? ARM? Long or short?

I've been wishing for a magic lamp that could tell me the right way to go, just like millions of others. Frankly, it's a bit like investing in the stock market when you think about it. You make the best decision you can, based on what you have read and the advice you've got, and you make a leap.

For our part, my wife and I are leaning a bit towards a shorter mortgage, with a variable interest rate. While interest rates are on the rise, they aren't rising quickly. And if you lock into a traditional mortgage at a fixed rate, the amount of interest that you'll pay is considerably higher than some of the variable options. We figure on what we save in interest up front, the rates could rise 2 or 3 percent, and we'd still do better in interest costs over the long run.

If you aren't the gambling sort (we are), consider negotiating the best locked in rate you can get, but take it for a shorter time period. Instead of 5 years, consider 3. With any luck, rates will have dropped or leveled out by the time you have to renew, and you'll have saved some interest along the way. After all, those 5 year locked in rates are a bit higher than the 3 year locked in rates.

It's all about what you pay in interest costs. Call me a miser, but I'd prefer to keep more of my hard-earned money in my pocket rather than any lender's pocket.


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