If you’re in the market for a new home, recently rising mortgage rates have likely gotten your attention. While these interest rate increases may impact your borrowing power, they don’t have to be a reason to panic and give up on your plans.
Why Are Rates Going Up?
Although they may not be what you want to see at the moment, higher mortgage rates are actually a positive sign for the economy. Typically, interest rates rise as the population begins to spend more. The goal is to keep the rising prices that result from this, known as inflation, at a manageable level.
Instead of focusing on the impact this will have on your mortgage, remember to keep the bigger picture in mind. Buying a home when consumer confidence is high and the economy is headed in a positive direction could pay off mightily in the long term.
However, there are steps you can take to make sure you are making the right decision. First, if you plan to buy a home in this type of market, work with a lender you trust. The stress of home shopping can be overwhelming. Having a mortgage partner who understands the changes taking place and values communication will be vital to maximizing your budget.
Rising interest rates are also a great reminder to review your credit history. Taking time to pay off old debts, clear up mistakes or otherwise improve your credit report could impact your borrowing power more than rising mortgage rates.
There is another reason not to let a higher interest rate scare you away from your next home. Although signing a 15 or 30-year mortgage is a major decision that should be taken seriously, refinancing it in the future is a realistic option.
If interest rates drop after you’ve bought a home, you don’t need to buy another one to take advantage of the savings. As long as you’ve maintained your financial health, it’s likely that you can refinance your existing mortgage to save money. Again, this is where having a knowledgeable mortgage partner can make all the difference.
And remember, purchasing a home is still a smart investment, no matter what the interest rates look like. Holding out for a future lower rate—that may or may not happen—while renting in the interim means that a landlord is getting a return on investment instead of you. If you can afford to purchase a home, the wisest decision in the longterm is to buy rather than rent.
Open Mortgage can help you navigate a changing real estate marketing by exploring all your options. Call me to speak with an experienced and responsive loan specialist today.