As mortgage rates increase, potential homebuyers may question whether it would be wiser to wait to purchase. After all, waiting may allow them to refinance at lower rates in the future.
But is waiting the right decision for you? Consider these potential reasons why delaying might not be beneficial: 1. Mortgage rates could rise even more.
1. You’ll pay more in the long run
Mortgage rates have seen dramatic fluctuations since the COVID-19 pandemic, prompting many potential home buyers to consider if waiting until rates have decreased would be more beneficial in terms of purchasing their dream home now or waiting. Waiting may cost more over time.
Interest rates are affected by inflation, and higher interest rates mean higher costs over time. Although it’s impossible to know for certain what mortgage rates will look like in the future, there are steps you can take now to secure lower ones, including making a larger down payment, improving your credit score, purchasing points or shortening loan terms – these could all save money and help secure lower mortgage rates in future – although this won’t necessarily happen shortly either! Should rates decrease again later on you could always refinance; though this is far less likely!
2. You’ll have a higher monthly payment
At present, mortgage rates aren’t as high as they were at their peak; however, if you wait too long to purchase your dream home it may already be too late!
If homeownership is your goal, now is the time to search for a home no matter the mortgage rates or monthly payment estimates. In addition, using a mortgage calculator could help determine exactly how much your monthly payments will be.
Even though mortgage rates can be difficult to anticipate in the future, experts anticipate a modest decline this year. While it likely won’t save homebuyers much money–perhaps only saving a few hundred on monthly payments–it still makes financial sense to purchase before waiting for another rate dip to occur.
3. You’ll have to pay for private mortgage insurance (PMI)
Private mortgage insurance can be an extra monthly cost for homebuyers, and can be prohibitively costly; however, it provides access to homes for buyers unable to collect a 20% down payment on their dream homes.
Early in your mortgage process, you should be advised of what Private Mortgage Insurance (PMI) costs will be and it should be included on your Loan Estimate. Sometimes this cost may be added into your monthly mortgage payment while sometimes you will pay a one-time premium at closing. PMI typically must be maintained throughout its lifespan although there may be ways to cancel it early on in its tenure.
If you can’t wait, PMI costs may be worth paying so that you can save on rent and homeownership expenses. With interest rates dropping, your payments could end up being smaller than anticipated, giving you additional equity building capabilities as you build equity within your new home and eventually reach the point of paying off your mortgage and no longer needing mortgage insurance payments altogether.
4. You’ll have to pay for mortgage insurance for the life of your loan
As it stands, waiting for mortgage rates to fall before buying a home could mean missing out on owning your own piece of real estate and reaping the wealth-building advantages associated with homeownership. Although mortgage rate movements cannot be predicted with certainty, you still have some control over this aspect – by improving your credit score, saving for down payments, and staying away from new debt.
If you have been considering purchasing a home, now is an ideal time to begin searching. Even if mortgage rates go back up later on, refinancing can still help you reach your dream. Contact Churchill Mortgage now to discover more ways you can own your dream home – then just enjoy being one! We look forward to helping you achieve homeownership together. – Matt Ricci of Churchill Mortgage