Today’s mortgage interest rates are a good bit higher than those of a few years ago, and that’s keeping many buyers on the sidelines, waiting for a better rate. Should you wait until interest rates drop to buy a house? Experts generally say no. Here’s what you need to consider.
No crystal ball of interest rates
Unfortunately, no one can predict what interest rates will likely do over the next few years. Although rates were 2 to 3 percent just a few years ago, historically, rates have generally been higher than today’s current rates. It’s possible that if you wait a year or two to buy, interest rates may be even higher than they are today. So, experts say that as long as the home you pick is within your budget, the possibility of a lower rate in the future is not a sufficient reason to delay your purchase.
Why are you buying?
Homebuyers are in the market for many reasons. Perhaps they are first-time buyers who are ready to stop renting and start building equity. Or they may be young parents who don’t have room for another child in their current home. They may be retired empty-nesters who are ready to downsize and/or move closer to children and grandchildren. Whatever the reason, people shopping for a home have a need they want to fill.
If you find a home that meets that need, you could lose it if you wait for a better interest rate. There’s a saying in the real estate industry: “Date the rate and marry the home.” If you find your dream home and choose to finance it at today’s higher rates, you can always refinance if rates drop in the future.
Keep rising prices in mind
Though there’s been some variability, housing prices have mostly skyrocketed in recent years. Today’s low housing inventory makes it likely prices will continue to leap. It’s possible you’ll be priced out of the market by the time interest rates drop (if they do).
Delaying a home purchase to wait for a better interest rate keeps you from reaping two benefits of home ownership: tax benefits and the chance to build equity. The sooner you buy, the sooner you can take advantage of these factors.