Should You Buy When Interest Rates Are High?

Making the jump from renting to homeownership can be incredibly intimidating, and how do you know if this is a “good market” to buy in? The answer may surprise you.

While interest rates have been higher in the last year or two, home prices have decreased and more sellers are offering to pay closing costs. 

There is a give and take here: a “down” market means lowered home prices, and less competition, an “up” market (such as when interest rates are low) drives up home prices and increases competition for the same listing. 

Financial experts believe interest rates will drop again in the Spring, but in fact buying a home while they are higher may not be a bad for you.

Top lenders are offering no-cost refinancing for those buying with current high rates, which means you can buy a house with a lower purchase price – and when rates lower, so will your monthly payment.

If you’re paying $2,000 in rent, with as little as 5% down you could afford a one bedroom condo including the HOA fee. Here are some properties you may qualify for:

https://www.zillow.com/homedetails/919-2nd-Avenue-W-UNIT-204-Seattle-WA-98119/2114155548_zpid/?utm_campaign=iosappmessage&utm_medium=referral&utm_source=txtshare

https://www.zillow.com/homedetails/1105-Spring-Street-UNIT-309-Seattle-WA-98104/80110181_zpid/?utm_campaign=iosappmessage&utm_medium=referral&utm_source=txtshare

https://www.zillow.com/homedetails/2450-Dexter-Avenue-N-UNIT-301-Seattle-WA-98109/49083746_zpid/?utm_campaign=iosappmessage&utm_medium=referral&utm_source=txtshare

At todays interest rate of 7% that means you could buy a home for $300,000 makes your monthly payment similar to what you’d already being paying in rent.

Tax deductions you may qualify for, such as deducting your interest rate and property taxes, take this number down to the same or lower than your current rent. 

In addition, you’d get stable monthly payments that would decrease over time. You’d also be building equity with every payment, preparing you to buy a dream home that would cost you even less to buy! 

If you’re waiting for interest rates to go down to 6%, prices will rise by about $75,000. That would make your monthly $2,518 after taxes for the same home. 

A lower rate may not actually make your home purchase more affordable for you, using a window of opportunity in a slower market could save you far more in the long run. As you refinance, you could take hundreds of dollars off that monthly payment. 

An added benefit of buying in a down market is your home appreciates faster as home prices are driven up when the market heats up, meaning you’re creating more wealth faster by purchasing at slower time.

I always recommend reaching out 3-6 months before you’re wanting to move homes, send me an email to see what might be possible for you.