The effect interest rates have on your dream of home ownership

Many people are holding off on buying a home because interest rates are higher now than they have been in recent years. It’s important to take a step back and look at the whole picture in regards to how interest rates effect your ability to buy a home. Let’s first quickly breakdown what interest rates are.

In real estate, the interest rate is the amount charged on top of the principal by a lender to a borrower for the use of assets. Basically, it’s how they make money by lending you money. When interest rates are higher, you will will be paying more compared to when interest rates are lower. When interest rates drop, you can refinance and lower your monthly mortgage payment.

Interest rates effect how much you will pay per month in housing costs, so it’s an important factor to consider when buying a home. However, interest rates fluctuate all the time, even daily. Due to this fluctuation there may be a time in the future where rates are lower, and you can refinance to benefit from the lower rates. Next, let’s discuss the issue with waiting for interest rates to drop before deciding to buy a home.

In 1971, the interest rate for a mortgage was about 7.33%. If you waited for interest rates to go down, you wouldn’t have purchased a home until 1993. You would have rented for 22 years waiting for rates to go down. Meanwhile the value of real estate quadrupled and waiting might have made it more difficult to become a homeowner. A known quote in the real estate industry is “Don’t wait to buy real estate, buy real estate and wait. Marry the house, date the rate.”

I would add to that quote “you can always refi, you can’t rebuy.” So if there is a home you have your eyes on, and you can afford the monthly payment on it, you should strongly consider purchasing the house. If you think you are ready to make the transition from a renter to a homeowner, contact me and I will give you all the information you need to make this dream a reality. A goal without a plan is just a wish, so let’s start planning together.

Lee Pitts

Realtor®

Enabl Realty

Lee@enablrealty.com

818-809-6983

DRE #02227090

https://enablrealty.com/

About Lee Pitts

Lee firmly believes that the American dream of homeownership is within reach more than people may think, and takes immense pride in helping individuals achieve their real estate goals.