If you have a really low mortgage rate on your home right now, but you want to buy another home, there needs to be some sort of justification, for giving up the historic, low-interest rate to go into a higher-priced mortgage, here are some things consumers have to weigh out as a relates to making a move in this environment…
Homeowners who advantage of historically low-interest rates in the last three years. Those low-interest rates don’t make it an extremely attractive proposition for you to buy a new home when your current rate is 3% and the mortgage rate on the new house you want to buy is 6.5%.
Let’s say your mortgage payment is $2500 a month and you want to buy a new house for $700,000. The new house is at $700,000, even if you sell your home and put in all of the equity from your departure home into the new home, you’re still going to be paying a substantially higher mortgage payment, even with 300k down. It’s realistic that in a situation like this, your new mortgage payment might be somewhere around maybe $4500 a month to account for the higher purchase price and account for the higher interest rate.
So you’re going up in payment of $2500. Can you do it? Maybe you should do it well that’s a different situation altogether. If you’re going to go up in mortgage payment, your income needs to be higher as well too, or the new house has to be such a good opportunity in terms of maybe the house has a granny unit, or there’s another unit on the home for example, that you can rent out to the mortgage payment while it is more, it could be offset the payment,
Maybe the new house is in alignment with being more equidistant to your job or closer to your kids or their school. It ought to be a situation in which buying the new house makes sense to justify taking on an extra $2k+ a month. The point is to have a plan. So let’s say you have consumer debt i.e. credit cards phones etc. One justification that you could make would be to pay off this consumer debt, which will radically lower your payment which then could be parlayed into making a justification for a higher mortgage payment. The house has to be such a good opportunity to make the justification for going into a pricier loan. This is also why some families choose to not buy a home and decide to cash out instead because if you cash out your real estate taxes stay the same and you can still upgrade the home and you don’t have to go through, the home buying process, let alone having to pay potentially higher property taxes as a result of buying a more expensive home.
The other option is to wait it out. This is what many families across the United States right now are doing because they can’t make the justification to change to a higher interest rate and who can blame them? This situation most likely is temporary and will evolve into something in the future to what however, no one knows it is projected long-term mortgage rates will come down. When interest rates come down more people will have more home equity and more buyers will emerge creating more bidding wars. So if you want to get a fair price home, despite interest rates being high 2023 might be the right time to do it if you can bite off the discomfort in the changing of payment and changing of interest rate.
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