Why Higher Mortgage Interest Rates Won’t Stop Me From Buying a Home
If you’re ready to buy a home, don’t pass up your chance just because rates have gone up a bit.
- Mortgage rates have risen from record lows last year.
- Some homebuyers are worried about rising rates.
- For many people, buying now is still a good investment.
Mortgage rates have risen significantly since the record lows they reached at the start of the pandemic. In fact, rates in March 2022 are now a full percentage point higher than they were in the summer of 2021.
Despite the fact that a mortgage will definitely cost more now, I wouldn’t let that interfere with my plans to buy a home if I was in the market to buy one. Here’s why.
Buying a house is a good investment
The fact is, even when mortgage rates are relatively high, buying a home is generally still a good investment for most people.
Homes tend to appreciate in value over the long term, and homeowners on average end up with higher equity than renters because they benefit from property appreciation and acquire a valuable asset. as they pay off their mortgage.
Mortgage interest is also tax deductible for those who itemize, and rates are much lower than most types of debt. If you choose a fixed rate loan, your rate and payments are also locked in, so your housing costs are predictable. And because inflation erodes the purchasing power of money, your mortgage payments actually become cheaper over time.
Rates are still low by historical standards
Although rates are high by pandemic lows, they are still very low by historical standards. For many people, it is possible to borrow to buy a home at less than 4.5% right now. By comparison, in the 1980s mortgage rates briefly exceeded 16% – and in the 2000s they were above 6% at times.
Since rates remain relatively competitive overall, borrowing is still affordable for many potential buyers – as long as they don’t struggle to buy a home that’s way beyond their means.
It is difficult to predict how rates will move in the future
While it may be tempting to wait to buy a home until rates drop, no one can predict when or if that will happen. In fact, rates are just as likely to go up as they are to go down. Waiting in the hope that rates will drop, you could find yourself sitting on the sidelines for years as property values rise without you.
Refinancing in the future is always a possibility
Finally, if rates do end up falling in the future after getting a home loan, it’s almost always possible to refinance and take advantage of the lower rates.
Refinancing means getting a new home loan, which could be at a lower rate than what you are currently paying for your mortgage. Although there are upfront costs associated with this, it is worth it when rates drop sharply. Plus, the ability to refinance helps prevent buyers from getting stuck with very expensive loans when interest charges drop.
For all of these reasons, if I was financially ready to buy a home, there’s no way I’d let rising rates deter me from going all the way. It could mean giving up a big chance to start building capital and becoming a homeowner.
A Historic Opportunity to Save Potentially Thousands of Dollars on Your Mortgage
Chances are interest rates won’t stay at multi-decade lows much longer. That’s why it’s crucial to act today, whether you want to refinance and lower your mortgage payments or are ready to pull the trigger on buying a new home.
Ascent’s in-house mortgage expert recommends this company find a low rate – and in fact, he’s used them himself to refi (twice!). Click here to learn more and see your rate. While this does not influence our product opinions, we do receive compensation from partners whose offers appear here. We are by your side, always. See The Ascent’s full announcer disclosure here.