Good Question? Yes, rising interest rates is a consideration, but so are some other things that might be even more important depending on your situation and your overall goals. Here are some things to consider from a situation that came up recently.

The goal in the example is to get the mortgage paid off within 5 years. The interest rate is only one of the technical considerations. Many people make decisions based on these technical details that are out of our control. Yes, managed, but not controlled.

The best way to stay in control and confident is to remember your primary goal and your reasons for choosing the product and terms you did in the first place. It is also important to know your exit plan - ie. when do you abandon the current program?

All this is not to say don't lock in; rather, don't make the decision based on fear of interest rates rising. In the case of mortgages, a good mortgage broker will consider your financial planning goals and present you with solutions that will meet those goals. In the example above the goals are: to be mortgage free before retiring from work, to maintain flexibility of payment while still considering new work, being confident in your decision based on different outside influences (i.e. interest rate). Your broker will also present you with the pros and cons of switching in the context of your financial goals and current financial situation. There are costs, time, etc. that all come into the picture. Before a meeting with your financial advisor or mortgage broker, it is helpful to know what your top monthly mortgage payment could be; what your time frame for payout is (in months) and other considerations and factors that could affect your payment plans. Some examples here could be different work, and therefore different income where you might be able to make higher or not as high payments, or possible lump sums of money that could be applied to the mortgage, or even the need for extra cash in the case of an emergency or terrific opportunity.

There is a lot to consider. This is why the expertise of a financial planning professional is so valuable, because getting focused too much on the rate of return before everything else will not help you stay in control or make decisions that are supportive of the bigger picture. This is the same approach you need to take with your investments: consider the bigger picture, goals, current needs, etc. first, then work your way toward considering the interest rate.

Copyright 2006 Tracy Piercy

MoneyMinding and Tracy Piercy accept no liability for the content of this article or for the results of any actions taken or not taken, on the basis of the information provided. The content is intended for informational purposes only and is not a substitute for professional, personal financial advice.