The Cost Of Waiting For Mortgage Rates To Go Down

Mortgage rates have increased significantly in recent weeks and many people have questions on how this affects them if they’re buying or selling a home.

As mortgage rates rise, they impact your purchasing power by raising the cost of buying a home and limiting how much you can afford for the same payment. Let’s assume you wanted to buy a $400,000 house. If you’re trying to shop at that price point and keep your monthly payment about $2,500 to $2,600 or below, here’s how your purchasing power can change as mortgage rates climb.

The red shows payments above that threshold and the green indicates a payment within your target range. As rates go up, the amount you can afford to borrow decreases and that may mean you have to look at homes at a lower price point.

Are mortgage rates gonna go down? Well the rise in mortgage rates and the resulting decrease in purchasing power may leave you wondering if you should wait for rates to go down before making your purchase. Realtor.com says that the already high rates are just gonna get higher in the short term. So if you’re waiting for mortgage rates to drop, you may be waiting for a while as the federal reserve works to get inflation under control. Just remember, rents also rise with inflation and the interest rate on rent is a hundred percent.

So while rental price increases have started to show signs of easing slightly, they are still at the highest pace in nearly forty years. It costs more to buy a home today than it did last year but the same is true for renting. This means either way, you’re gonna be paying more. The difference is with home ownership, you’re locking in your payment now and gaining equity overtime, which will help you grow your net worth.

Bottomline, each person’s situation is unique and to make the best decisions for you, we’d love to connect to explore your options.