Magazine

Impacts of Rising Federal Interest Rate on the Hard Money Market


paperfree Aditi Bansal

Updated on Thursday, May 04, 2017

You can never predict with total precision the Feds next planned move with your financial policy. However keeping a close eye on their public report can provide hints that financial and economic specialist decrypts for the public.

tags  #Rising Fed Rates  #Real estate Investor #

 

Experts have predicted a rate increase in the federal rates. The Federal Reserve meets regularly in Washington DC to establish fiscal policy by lowering or raising the interest rates.

Effects on Hard Money Lending

Since hard money lenders source their funds from private investors, a change in the federal rate doesn't affect the hard money jumbo loans. However, the increase in the federal rate can cause a competition amongst hard money lenders which will, in turn, affect your borrowing rate. Lenders can structure hard money jumbo loans, an exit strategy, and the collateral release in a flexible way since hard money jumbo loans tend to be short-term. Hard money lenders modify a payment plan that is equally beneficial to both the borrower and the lender after taking a more comprehensive look at the borrower’s development goals and possible projects. Their approach differs from the conventional banks. The hard money lenders approach affords the borrowers a greater degree of freedom from the impacts of the Federals financial strategy.

Effects on conventional lending

As the Federal Reserve plans to increase the interest rates in the coming year, you should be aware of the impacts of the federal fiscal policy on your mortgage rates and the lending rate. Hard money lenders and conventional banks differ in some ways. Hard money lenders are not held to the values set by Fannie Mae and Freddy Mac which is a government sponsored enterprise that invests in mortgage- supported securities. On the other hand, hard money jumbo loans offer a valuable tool for high-end property owners.

Your mortgage rate is likely to experience an uptick as the Federal Reserve interest rates rise; this will happen if you have taken out an adjustable-rate mortgage through a conventional lender. The advantage of an adjustable-rate loan is the low short-term rates. However, these loans are susceptible to the instability of fiscal policy. If you took out a 15 or 30 year fixed rate mortgage, you would stay protected at the current interest rate.

As the interest rate increases, it creates a great impact on the credit card rates and adjustable mortgage rates.

Selecting your Lender

Hard money jumbo loans and bank loans are different; they meet their clients’ needs in the lending market. Conventional money lenders offer longer terms than the hard money jumbo loans. Therefore, if you are looking to finance your primary residence or maybe you want to take out 30 years fixed rate mortgage, you are likely to stick to the conventional lenders.

Hard money jumbo loans will remain at the position of being the best option for short-term investments, construction for resale and residential rehab. Real estate investors prefer hard money jumbo loans because of its result focused structure which helps them evade the logistical hitches of bank lending including long approval time, fixed loan structures and changing rates. Although the initial rates of hard money jumbo loans tend to be higher than conventional loans, it sets your project in motion.

As the Federal Reserve raises the interest rates, conventional lenders also do so. Therefore hard money jumbo loans will remain to be a priceless resource to fix and flip developers in funding the first renovations and catalyze construction on their project before resale.



This page with a focus on Rising Fed Rates, Real estate Investor was shared by Aditi Bansal.

 
Share this on:

More links