So you’ve finally saved up enough for a down payment, and interest rates have doubled. Do you still buy? Yes, you should buy.
Interest rates are higher than they have been in decades, however, when it comes to interest rates, you have to live in the present. No one can know what will happen in a year. If you buy now, and interest rates rise in the next year, your rate is locked in and your payments won’t change — but rents will rise with inflation. On the other hand, if you buy now, and in a couple years rates go down, you can still refinance. Rising interest rates also have a downward pressure on prices and availability. Higher interest rates is slowing the housing market and raising inventory.
Of course, you can gamble that inflation will go down and the Fed will begin reducing interest rates, but the reality is, the low-interest rate ship has probably sailed for several years at least. There are options, such as adjustable-rate mortgages (ARM), which have lower rates over five to 10 years and, if you qualify, you could spend more for a home while making lower payments. In mid-2022, adjustable-rate mortgages made up 10 percent of all new home applications.
The key question is whether you are ready to buy. If you have your down payment, your debt is low, and your employment is steady, then it’s time to start using your money to build equity in your own home.
You’ll have tax advantages since property taxes and mortgage interest are tax deductible and the value of your house is likely to rise over the years.