Mortgages to a halt?
Interest rates keep climbing up which makes potential house buyers think twice. Compared to a few months ago, mortgage rates have more than double increasing the ownership cost that is already affected by higher house prices.
?Are the high house prices and high interest rates causing the mortgage industry to come to a halt? Well, they definitely don’t help. In the past, consumers had to deal with high interest rates and low house prices or overpriced houses but ridiculously low interest rates (as low as 1.99% for a 15-year mortgage). In an ideal world, a buyer wants low house prices and low interest rates. In the current market though, buyers are asked to pay higher than usual house prices due to lower supply AND higher interest rates. The combination of these two factors shows the market response almost immediately.
?On the other hand, life goes on. People inherit houses, people get married, families grow, employees move to new cities, pensioners look for warmer places to retire, new communities develop, certain areas get flooded beyond repair. Individual lives roll at a quick pace and their housing needs change as well. People though, continue to buy houses, and they need a way to finance them.
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For those who are skeptical into getting a mortgage, they need to ask first what is the cost of not purchasing a house. For example, how much does it cost to rent vs buying. Can you build equity if you rent? Absolutely not. So, although the cost of owning a house has increased, the benefits in the long run are several. And the best part is that once the interest rates decline, the customer can always refinance.
?As always, do your research when it comes to neighborhoods and see what each has to offer (i.e. proximity to work, safety, schools, parks, bike paths, aquatic center, stores and restaurants). Find a house that fits your needs in terms of size. Don’t go overboard but you might need slightly bigger house if the family is growing. Work with an experience banker or mortgage officer to understand the loan terms (variable, fixed) and find out a monthly payment that you fill comfortable with. Don’t forget to ask of any available discounts and closing cost savings.