I can’t take credit for the popular phrase “Marry the house…but date the rate”. It’s being posted by mortgage professionals and real estate agents all over the place.
What does this expression mean?
It means that if you find a home you love, don’t let current interest rates prevent you from moving forward and buying it.
Essentially, don’t be afraid to buy the house you want right now because of external market conditions!
A mortgage does not have to be long term, in fact most people refinance their homes several times as mortgage rates improve or should they need to take cash out from their equity.
Is It A Good Idea?
Committing to the house doesn’t mean you have to commit to today’s financing forever. Buyers can always look for a better financing opportunity down the road and make a change when the time is right.
It is absolutely possible to change your financing to more favorable terms later, should better rates and products become available… and if rates only get worse, then you’ll be glad you married the house when you did.
Interestingly, the average tenure of a mortgage is under 6 years…meaning most homeowner’s either move or refinance their mortgages quite often.
Better Rates Down The Road?
I do think there’s a good possibility of lower rates in the future. More on that here…and here.
Believe it or not, we might be in for an upcoming perfect storm – and in a good way for borrowers.
It does look a recession is around the corner, which almost always results in lower mortgage rates. I know that sounds counter intuitive, but mortgage rates actually fall during recessions.
Also, one of the few areas that seem relatively immune from recession is the housing market. Historically, one of the safest bets during recession is real estate.
The chart below shows how housing stays quite resilient during and through recessions:
Looking back at eight of the nine recessions since 1960, home prices significantly increased or at least remained stable each time during and after the recession. One of the reasons this occurs is because interest rates significantly fall during recessionary periods.
What Buyers Should Do Now
Essentially, all of these factors listed above should combine for LOWER rates later this year into 2023.
Of course, things can change, but it sure is looking like a recession is on the horizon, which will undoubtedly bring lower mortgage rates.
Well, waiting to purchase a home and “timing the market” is one option…but it’s almost always a bad idea.
Why? Because no one knows exactly when rates will hit rock bottom – and home prices will continue to accelerate.
More importantly, buyers will miss out on the gains of owning a home. Homes increased in value over 15% last year in the west…and things aren’t getting any cheaper. More on trying to time the market here…
Purchase Strategy
I recommend making your purchase now – and NOT paying extra discount points to lower your interest rate. As a matter of fact, you could use “negative” points to help offset any closing costs.
Instead of paying discount points to access lower mortgage rates, borrowers can receive credits from their lender and use those monies to pay for closing costs and fees associated with the home loan.
Yes, the interest rate might be slightly higher, but you will want to refinance this mortgage when rates drop later this year or next year! This will also limit your out-of-pocket fees for the initial transaction.
In Conclusion
Although things look a little grim currently, the future is actually looking bright for mortgage rates later this year and into next year.
Would you like to find out more? Contact me to discuss your current situation and how you might be able to take advantage of today’s market. It would be my pleasure to help you!
