Prospective homebuyers across the country are asking themselves, “Should I buy a home now or wait?” The forecasts on inflation, mortgage rates, and the housing market seem to change every day. While home loan rates may be higher than the historical lows from a few years ago, purchasing a home now may still be a great idea. From building equity to future refinancing, let’s take a look at six reasons why you may not want to delay buying a home.
1. Mortgage Rates Could Keep Rising
While experts can forecast certain mortgage or economic trends, the truth is no one has a crystal ball. Mortgage rates could keep rising. The low rates of 2020 and 2021 were pretty much anomalies, and mortgages are not expected to return to those levels anytime soon.
2. Less Competition
A few years ago, there was a home purchase frenzy as mortgage rates dropped. Now, whether it’s the unpredictable economy or higher-than-anticipated interest rates, many consumers in select markets are getting cold feet and choosing to put their search on hold. That means less competition and more opportunity to find the perfect home.
3. Equity-Building Opportunity
Owning a home can offer some long-term benefits that renting cannot. One of those benefits is the opportunity to build equity. Home equity is the difference between your home’s market value and the amount you owe. Every time you make a mortgage payment, your equity grows.
The great thing about equity is that it acts like a financial cushion – you can use it as collateral in the future. Through a home equity loan, you can cash in on your home’s equity and use the money for renovations, debt consolidation, business and investment opportunities, educational expenses, and more.
4. You Don’t Want To Miss the Right Property
In today’s housing market, finding the perfect home can be like finding a needle in a haystack. If you see a home you love–and have excellent credit, at least a 20% down payment, income stability, and substantial savings–now may be the time to take the buying plunge. Plus, in select markets, housing prices are starting to stabilize or dip. You never know when your ideal home and budget may enter the market.
5. You Can Always Refinance
Even if you purchase a home now and end up paying slightly more for your mortgage than you had anticipated, remember that refinancing in the future is an option when rates fall. If you decide to refinance, there are a couple of items to consider such as the length of time you plan to stay in your home and the associated closing costs.
If you decide to refinance, there are a couple of items to consider such as the length of time you plan to stay in your home and the associated closing costs. Refinancing can indeed be a wise financial decision if the math works out in your favor. Here’s how refinancing works:
- It replaces an existing mortgage with a new loan, typically one with a lower interest rate. Another option is a cash-out refinance, where you replace your current mortgage with a new loan for an amount higher than your existing balance, receiving the extra money in cash to spend as you wish.
- Refinancing can reduce monthly mortgage payments, change from an adjustable rate (ARM) to a fixed-rate mortgage, or shorten the home loan term
- For example, if you take out a 30-year $300,000 mortgage at 7% now and the rates go down to 5% in five years, you could refinance your loan balance into a new loan at that lower interest rate or refinance to a 15-year mortgage
6. Tax Advantages
Homeowners may qualify for tax benefits, such as tax credits, which reduce your tax bill dollar for dollar, and tax deductions, which reduce your tax liability. If you’re renting, you do not qualify for housing-related tax perks, but as a homeowner, you may be eligible for the following:
- Tax deductions for mortgage interest, mortgage points, private mortgage insurance (PMI), and up to $10,000 of property taxes
- Federal tax credits for energy-efficient home upgrades, such as heat pump installation and insulation
- First-time homebuyer tax credits and incentives
Pros and Cons of Buying a House Right Now
Buying a home is a big decision in any housing market. The current interest rates can influence prospective homebuyers and potentially add an extra layer of apprehension. But, interest rates can fluctuate over time, and it’s important to consider their impact on your decision to purchase a home. Certainly, nobody wants to spend more money than necessary, so it’s important to weigh the costs and benefits to make informed choices. Consider the following summary of the pros and cons of buying a house right now vs. waiting until interest rates drop.
1. Pros:
- Interest rates may keep climbing
- Start building equity instead of paying rent, which may also rise
- House prices are flattening and falling in some markets
- Potential tax advantages
- Less competition in certain markets
- Refinancing to a lower rate is possible if interest rates dip in the future
2. Cons:
- Higher interest rates than in past years
- High real estate prices in many markets
- Short housing supply in some markets
Is It Time for You To Buy a House Now?
Should you buy now or wait until interest rates drop? Considering other factors beyond interest rates is crucial when making financial decisions. If you’re financially and emotionally ready for homeownership, have a stable job, and plan to live in the home long enough to recover the closing costs, homeownership may be right for you. Invest in your future, build your equity–instead of your landlord’s–and put down roots in a place you can call your own.
