08 Aug I have an adjustable mortgage. What should I do with rising rates?

Q. I have a seven year adjustable mortgage that’s two years in. I was planning to move before the seven years was up but now I’m not sure because other home prices have gone so high. At the same time, I’m afraid of what will happen to interest rates when the fixed time period of my loan ends. Should I refinance now or what do you think will happen long-term to interest rates, like five years in the future?

— Homeowner

A. You’re right to be concerned about rising interest rates.

You didn’t say what your interest rate was and whether you’re working or retired, so it’s hard to be super specific about your situation.

But here’s what you should consider on a macro level.

First, take a look at what your current rate is and compare that to a fixed rate that you would qualify for, said Altair Gobo, a certified financial planner with U.S. Financial Services in Fairfield.

More than likely, the new fixed rate will be higher, he said, so you need to see if your budget can handle the new payment.

Gobo said he believes there is more economic uncertainty today than there was a few years ago, and that the actual mortgage interest rate environment can get worse before it gets better.

“The quandary is what will interest rates be five years from now,” he said. “Since we don’t know the answer, this really becomes a risk management issue. How much risk are you willing to accept?”

If you keep your existing mortgage and rates are higher in five years, you would have been better off refinancing today, Gobo said.

But if rates are lower in five years, you are probably better off keeping your current seven-year adjustable rate.

“However, if you refinance today and rates are lower in seven years, you may be able to refinance again at a lower rate,” Gobo said. “Again, this all depends on the unknown — where are rates going in the next five years — and the known — what type of fixed rate mortgage do you qualify for today?”

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This story was originally published on Aug. 9, 2022.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.