Guest Author – Lindsay Moon PRO-Mortgage
Real estate - our homes, are one of, if not the biggest, assets we have. There are decades of proof that home values increase over time. Currently, interest rates are not where we’d like them to be, but for the time being, they are keeping the floodgates closed. For those who have decided to ‘just wait and see,’ you are not alone. There are a lot of people standing on the sidelines – ready and waiting for rates to drop. You’d think that maybe that makes sense, but if and when rates drop, and those flood-gates open, you and all those sideliners are going to be bidding on homes together, which will drive home prices up.
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Here's what can happen:
NOW: Purchase price $1M @ 7.25% with 20% down ($200k) = $5,457/mo
LATER: Purchase price $1.2M @ 5.75% with 20% down ($240k) = $5,602/mo
For those considering purchasing, right now, a lot of homes are sitting on the market for several weeks or more, and there are price negotiations to be had. In many ways, it’s a buyer’s market, and although there are pockets where there still may be a lot of competition, in most cases, there aren’t many competitors, and sellers are willing to negotiate more readily. Once you acquire the home, you may have a higher rate for some time, or you can look at a rate buydown, but you should expect to refinance down the line when rates drop. A general rule is that if you can save 0.5% or more on the interest rate, it usually makes sense to refinance. It’s rare that you’d keep your same mortgage for 30 years; most people will refinance for either a rate drop, or to pull cash-out, or both.
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For those considering refinancing, pulling cash out, and/or doing a 2nd mortgage like a HELOC or a HELOAN (if you’re doing this to make home improvements), consider it an investment. You’re spending money to make money, as improvements like upgrading a kitchen or bath, adding an ADU, or upgrading home features can add significant value to your home. And again, you’d want to look at refinancing once you’re done with construction anyway, because rates may drop and your home’s value has increased.
If you’re considering home improvements and don’t need financing, it’s also still a good time. Once rates drop, there will be more competition for general contractors and home services in general. These prices will go up as well as the difficulty of scheduling.
Get ahead of the game by considering making your move now rather than waiting. Ultimately, costs will be higher too, the longer you wait.
Lastly, there will always be some element of fear. Biting off big projects is scary, and moving/selling/buying is scary. These are major life events that you don’t want to make haphazardly. Making these moves when it’s right for you is what’s important. And I like to say that if you can get your foot in the door, then it’s the right time for you. Be sure to use professionals to help you with your journey – licensed realtors, mortgage brokers, builders, architects, and designers.
"Please note that no compensation was received for writing this article. All opinions, views, and recommendations expressed herein are solely those of the author and do not necessarily reflect the views of any organization or third party. This content is provided for informational purposes only."