If you are interested in buying a new home, the current low interest rate may help you decide whether to buy now or later. Borrowers have a once in a lifetime opportunity to buy a home with a 4% or lower rate on a 30-year mortgage. And even though interest rates are likely to start going up again, it isn’t too late to get a good deal on a great home. Is it a good time to buy a home…for you?
Barbara Friedberg from Go Banking Rates calculated the impact of an interest rate increase of 2% on a mortgage loan:
Borrow $175,000 for 30 years at a 6% interest rate and your payment balloons to $1,049. That’s a 26 percent increase in your loan payment.
However, there is more to a monthly payment than just the principal and interest. The borrower must also pay the added expenses of homeowners insurance and real estate taxes, which are expenses that can add another $500 or more per month.
So what’s a prospective homeowner to do? This question is stumping a lot of prospective homeowners, leaving them at a fork in the road–which direction is best for me?
In order to buy a home, you need to save now to accrue enough funds. However, if you sacrifice for a short time now, you can enjoy a home ownership for many years to come.
Real estate values have been on the rise for a while, but are likely to slow their pace. According to Zillow’s Chief Economist Svenja Gudell, prices are only expected to rise 3.5%.
The slowdown in home prices will prompt more owners to list their homes, giving buyers more choice. With more homes on the market, bidding wars will become less common and prices could ease even more.
The Federal Reserve is widely expected to begin increasing interest rates soon, which means that the window for record low mortgage rates is closing. While rates are gradually supposed to grow, higher rates push up borrowing costs and monthly mortgage payments. Therefore, this year, you may get the best rate you will ever see.
Rent prices are expected to keep climbing, which means in most cities, buying will be cheaper than renting. Even though mortgages could be more expensive, buying might still be the better investment.