Why You Shouldn't Wait for Interest Rates to Drop Before Buying a Home
Saturday Sep 23rd, 2023
So, you've got your eye on that dream house, but you're thinking, "Maybe I should wait for interest rates to drop a bit more before taking the plunge." It's a common thought, but let's chat about why waiting for those rates to drop might not be the best move.
Spoiler alert: sometimes, waiting might actually lead to a higher monthly payment.
Why's that? Well, it's all about the game of supply and demand in the real estate world
When interest rates are high, there aren't as many buyers in the market. That means sellers might have to lower their prices to attract potential buyers. So, if you can afford to buy a property now, even with the current higher interest rates, you could end up paying a lot less for the property compared to waiting.
But when those interest rates start to drop, something interesting happens – more buyers enter the scene
With lower interest rates, more people think, "Hey, it's a good time to buy!" So, guess what? Prices can start to climb because there's more demand. And that dream home you had your eye on? Well, it might cost you more when those interest rates finally dip.
Now, let's talk numbers
Say you can qualify for a home purchase right now with the current interest rates. You might think, "I'll wait for rates to drop and pay less per month." But that's not always true, and it can be a risky waiting game.
We’ll use an example of a home currently selling for $1,000,000. If you bought that property now, you might lock in a mortgage with a monthly payment of, let's say, $5,200 at the current interest rate.
But if you wait for rates to drop by 1% and then decide to buy, here's what could happen.
By that time, that same property you had your eye on might sell for $200,000 more. So, you'd be looking at a monthly payment of around $5,500. Why? Because you'd have to borrow more money to cover the higher purchase price, and that drives up your monthly payment.
Another factor to consider - Time is money
Something else to consider - if you are waiting for interest rates to drop instead of purchasing now, you are missing out on building equity in your very own home. Time is your secret weapon in the real estate game. The longer you wait, the more you miss out on potential appreciation and the chance to pay down your mortgage.
Ask yourself when you need to move and why you need to move. If you can handle it financially right now, it might just be the perfect time to act.
And here's a pro tip: consider a shorter-term fixed mortgage, like 1-3 years. That way, when interest rates finally do drop, you can take advantage of them.
In the end, it's not just about interest rates – it's about the big picture
Remember, it's not just about the rates; it's about the overall cost and the opportunities that come your way. Don't let the fear of missing out on the perfect rate keep you from making a smart move. Buying now, even with slightly higher rates, could save you a pretty penny in the long run. So, if you're ready and able, don't wait – secure your dream home and your financial future today!
Matilda N. - Your realtor that truly cares!