Here’s the Good News- Interest Rates Are UP!

Many of my buyers are reluctant to buy now because interest rates are “high.” I would argue pretty strongly that if you’re buying a home to live in, and you are borrowing on a conventional mortgage (like 80% down), you should be indifferent to market-wide interest rates.  OF COURSE, you want to get the best rate you can get for yourself, but high rates don’t mean you shouldn’t buy.

Some things to consider:

1. Interest rates move inversely to prices- The higher rates are, the lower prices are.  If you’re buying the home you’re going to live in (as opposed to an investment property) the relevant number is the monthly carry (Principle plus interest plus property taxes).  If that number stays the same, you are getting a similar value.
2. You can always refinance- If you pay $XXX,000 for a house, that is the purchase price forever.  This is true in high and low-interest rate environments.  In contrast, if interest rates drop in the future, you can refinance and LOWER your interest rate.  For example, if you buy a house at 7.25%, then rates go back to 2.875% (fingers crossed), and your payments can go DOWN, though your purchase price stays the same.
3. Buying in a high-rate environment gives you MORE flexibility when rates go down- If you lock at 2.875%, then want to move to a bigger house in 5 years when rates are 7%, you may be stuck.  You may not be able to afford the bigger house because you’d be both paying more $$$ and giving up your juicy low-rate mortgage.  In contrast, if you buy NOW, at 7% when rates go down, your house will be worth more in the future.  You will then have the CHOICE of refinancing at 2.875% OR selling your house (for more $$$) and BUYING at that new low rate.

Don’t let fear stop you.  Run the numbers.  Then be strategic.

‍