High interest rates have been shown to correlate with higher foreclosure rates. When mortgage interest rates are higher, the percentage of foreclosures tends to increase.
Interest rates continue to increase, and so do foreclosure rates. Higher interest rates and foreclosure can cause financial difficulties for homeowners. Whether you’re a new homeowner with a higher-interest loan or have been in your home for years, interest rates can affect your finances from every angle.
Contact Joshua Denbeaux today to learn more about your options to avoid foreclosure, especially if you’re feeling squeezed by higher interest rates and inflation.
Affordability of Homeownership
High interest rates on mortgages can make home ownership less affordable. A higher interest rate means the cost of buying a home is higher, both for the total amount you’ll pay over time for your home as well as your monthly payments.
It’s no surprise that when homeownership is less affordable, foreclosure is more likely. If you’re someone who bought a home more recently when interest rates started soaring, there’s an increased risk that you’ll be foreclosed on because your monthly payments are higher than if you’d been able to get a lower interest rate.
High interest rates can also slow down the housing market. If people are less able to purchase homes, the demand for buying homes will decrease, resulting in fewer sales. As someone facing foreclosure, this leaves you with fewer options to quickly get out from under your home if you’re facing financial hardship.
Variable Interest Rate Mortgages
Rising interest rates could be a major issue if you already own a home with an adjustable or variable interest rate mortgage. With an adjustable-rate mortgage, the interest you pay changes as current interest rates change.
Your monthly interest rate and total monthly mortgage payment will increase as interest rates increase. You could unexpectedly owe a lot more than your typical monthly mortgage payment.
While ARM mortgages are not as common, it’s important to understand what can happen if your monthly payment quickly skyrockets because of increased interest rates. Your options may also be limited to reducing your payments to make them more manageable if you cannot refinance them to a better interest rate.
Fixed Rate Mortgages
Homeowners with a fixed-rate mortgage won’t have monthly mortgage payments impacted by changing interest rates. Your mortgage payment interest rate won’t be impacted, but higher interest rates could still bring financial challenges.
Raising home interest rates sometimes correlates with rising prices across the board. If interest rates increase, you could spend more and risk higher debt.
If you’re struggling to afford your home because of the rising costs of all your other expenses, you may feel like you don’t have many options to avoid foreclosure.
Loan Modifications and Higher Interest Rates
Even if you’re struggling to pay your mortgage because of higher interest rates and rising living costs, there are options to help you avoid foreclosure. In many cases, using a loan modification can help you make your mortgage more affordable without selling your home or trying to refinance.
A loan modification is an agreement with your lender to adjust the terms of your mortgage and make it more affordable for you. Loan modifications can be a great option if you’re struggling with your mortgage payments because it allows you to modify your original mortgage by working with your lender.
Loan modifications most commonly lower mortgage interest rates by extending the length of your loan. Although higher interest rates can make loan modifications less likely because lenders can’t lower interest rates if they rise, it may still be an option for you if you have equity in your home and a history of paying your mortgage. Banks are still motivated to keep homeowners in their homes that have a strong history of paying to preserve their assets rather than letting a home sit empty on the market in a high-interest period with lower housing market demand.
Homeowners who are struggling with their mortgage payments may have more difficulty with options to avoid foreclosure or make their mortgage payments more affordable with higher interest rates. However, working with an attorney can help you negotiate with your bank and understand how to best navigate a high-interest situation.
Contact an Attorney Today
High interest rates can make homeownership less affordable and can lead to an increase in foreclosure rates. Interest rates are currently very high.
If you’re struggling with your mortgage payments or facing foreclosure, it’s important to contact a foreclosure attorney as soon as possible. An experienced foreclosure attorney can help you explore your options to avoid foreclosure.
Joshua Denbeaux is a New Jersey attorney dedicated to helping homeowners fight foreclosure and stay in their homes. Contact Denbeaux Law today to learn more about how we may be able to help you.
