For most people, home ownership is one of their major life goals. If you are finally in a good place financially, and you can finally purchase a home, you should consider buying in Rhode Island, While it may be the smallest state in the U.S., it is a state complete with beaches, art, culture, nightlife, and a very diverse population. If you are considering moving to Rhode Island, visit Movoto. You can find many Rhode Island homes in many Rhode Island neighborhoods.
Before you start looking at homes, you should know the current Rhode Island mortgage rates. It is also important to understand the different types of mortgages that are available, so that you can choose the one to best suit your financial needs.
30 Year Fixed
A 30 year fixed mortgage is a loan whose interest rate stays the same for the duration of the loan. Unless the taxes, insurance premiums of homeowner’s insurance, or HOA fees change, your monthly payments would remain the same. The main benefit of this type of loan is that you would be paying the lowest monthly payment. You may be considering this type of loan due to lower monthly payments, you should understand that the interest rate is often higher, and you will pay more total interest over the life of the loan than you would with another type of mortgage. Currently, the rate on a 30 year fixed loan is 3.59%.
15 Year Fixed
Like the 30 year fixed, your monthly payment would be the same every month. With a 15 year fixed, you would be paying a higher monthly payment than the 30 year fixed, because the life of the loan is shorter. You would be paying less interest over the life of the loan than with the 30 year fixed, and the interest rate would be lower. The current rate for a 15 year fixed rate in Rhode Island is 2.76%.
Adjustable Rate Mortgage (ARM)
An adjustable rate mortgage has an interest rate that can change. For example, if you have a 5/1 adjustable rate mortgage, your interest rates would remain the same for the first five years. The 1 in the 5/1, means that the rate can change every year after that. If you had a 5/2 adjustable rate mortgage, your interest would remain the same for the first five years, and then would be subject to chance every two years after that. There are a few situations where an adjustable rate mortgage would be prefect for you:
- If you are planning to move within the next few years, before the introductory fixed rate period is over, you can take advantage of the low interest rates, and then move before the rate increases.
- If you are expecting a raise in your income in the next few years, you will be able to afford the increased interest rate.
- If you need a lower monthly payment than what you could get from a fixed rate mortgage.
- If you have faith that interest rates will be lower in 5 years.
While this type of loan can benefit certain people, there are also some disadvantages:
- If the interest rate goes up and your income does not, you may not be able to afford the monthly payment.
- An increase in the interest rate will reduce the accumulation of equity in your home. This is especially true if the value of homes is declining. It can also make it difficult to refinance your home.
The current rate for a 5/1 adjustable rate mortgage is 3.14%. The average rate for a 7/1 adjustable rate mortgage is 3.40%.
2016 Mortgage Bank Rate Predictions
It is difficult to predict what Rhode Island mortgage rates will look like in the coming year. However, there are a few leading experts who have their own mortgage rate forecast.
- Colin Robertson, creator of TheTruthAboutMortgage.com: Mr. Robertson believes that due to recent global tensions, that there is a question as to where the economy will be in 2016. If there is economic uncertainty, the mortgage rates will be lower. When things seem to be heading in the right direction, mortgage rates will rise. Overall, he believes that there will not be a very significant increase.
- Brad Yzermans, loan officer and creator of HomeLoanArtist.com: Mr. Yzermans believes that mortgage rates will rise by at least .375% during 2016. He has stated that many mortgage brokers and loan officers raise the mortgage rates during an election year. Many just use fear as an excuse to get people to take action quickly, and buy or refinance before the fear of the election year has had an effect on the mortgage rates.
- Sean Young, loan officer and mortgage blogger at MyLenderSean.com; Mr. Young believes that the 2016 market will continue to surprise us. In 2015, many people predicted a rise in interest rates. By the end of the year, it was a great year for mortgage interest rates. He believes that if there is a change, it will be an increase by 0.50 to 0.75%. He also suggested that new home buyers look into adjustable rate mortgages. He stated that with the increase in rates, that an ARM could save you thousands of dollars per year.
- Bill Ladewig, loan officer and FHA expert at Your FhaGuru.com; Mr. Ladewig has stated that even if the interest rates go up, it won’t effect buyers in a great economy. He believes that as long as things are going the way that they are now, a small increase in mortgage rates won’t make much of a difference.
If you are considering buying a new home in Rhode Island, you should seriously consider the types of mortgages available to you. It is also a good idea to know a bit about what experts are predicting when it comes to the mortgage forecast in 2016. Even if you don’t put too much stock in a simple prediction, this information will at least give you something to think about before you sign on the dotted line.
2 Point Highlight
If you are finally in a good place financially, and you can finally purchase a home, you should consider buying in Rhode Island.
If you are considering buying a new home in Rhode Island, you should seriously consider the types of mortgages available to you. It is also a good idea to know a bit about what experts are predicting when it comes to the mortgage forecast in 2016.
