Mortgage Rates Are Rising: Can You Afford Your Next Home?
Mortgage rates are on the rise - everyone can see that! Since the start of the year, mortgage rates have climbed almost 1.5%. This can make anyone in the real estate market fearful, especially homebuyers who are looking to purchase their next house. In this article, we will explore everything you need to know about rising mortgage rates and entering the real estate market as a buyer.
Before we all get up in arms over mortgage rates, let’s take a moment to understand a bit about what they really are. A mortgage is essentially a deal you make with a lender that lets you purchase a home with borrowed funds. If you fail to pay back the borrowed loan money, the lender has the right to your collateral. Collateral might be your current residence, car, or other asset in your name. The faster you pay off the loan and give the lender back the money you borrowed, the lower your fixed mortgage rate will be.
Currently, mortgage rates are averaging about 4.69%. Everything is getting more expensive, including the cost of buying a new home. We see it in the supermarket, retail stores, and in the real estate space.
Economists and real-estate experts are warning buyers not to worry - yet. The reason so many are fearful of climbing mortgage rates is mainly due to the fact we are seeing sticker shock since the Covid pandemic that impacted prices from 2020-2022. During this time, the economy was in a rare state where people were moving houses due to relocation due to work, unemployment, or safety factors. If you take a look at the average mortgage rate for the last 50 years, the average mortgage rate has been sitting right around 8%. This statistic would make any homebuyer jump at the opportunity to purchase with today’s current rates!
The best thing you can do when deciding if you can afford your next home amidst rising mortgage rates is to work with a real estate financial advisor and feel well-informed as to your current savings, earnings, and budget plan. The best piece of advice we can give you in this article is - do not try to outsmart the market.
Waiting for lower rates to come or jumping on purchasing a house the minute mortgage rates see a slight increase can land you in a sticky financial situation. While buying a home is a big milestone, it is also a huge financial commitment. You don’t want to get yourself into debt simply due to a slight change in economic pattern.
As we stated earlier in this article, the best thing you can do to maintain financial wellbeing when entering the real estate market is to be well-informed. Working with a professional can help give you financial confidence prior to putting an offer in or deciding to start your home search. They will help you understand what you can afford and what adjustments you will have to make in other aspects of life in order to make homebuying right for you.
To speak with a VSells & Associates representative and do your next real estate transaction the right way, contact us now!
Whether you are buying or selling, we at VSells & Associates make it our mission to guide our clients through the whole process. We make moving simple, straightforward, and as stress-free as possible.