Rates May Be Up But It’s Advantageous for Buyers

Interest rates are rising, but there are opportunities waiting for buyers.

In today’s market, interest rates have gone up, and buyers’ purchasing power has gone down. On the surface, it may look like buyers are at a disadvantage; however, there are a few benefits to this market that may help you get a better deal than you could have earlier this year when interest rates were much lower.

To support that claim, we recently had a client go under contract on a home for $80,000 under list price, and that home appraised $100,000 over the contract price. We’ll use that transaction as a baseline for our sample computation: Let's say you're looking at a $600,000 home earlier this year. Homes that sold for around that amount went $50,000 to $100,000 or more over list price. However, because of a bidding war, you'll have to pay $700,000 for that $600,000 home. At a 4% mortgage interest rate, your monthly housing payment would be about $2,700 with principal and interest and not including your taxes, insurance, etc. Also, if you're doing a 20% down payment, that means you're putting $140,000 down.

"Interest rates may be higher now, but you’ll pay less money in fees and less money up front in general. "  

In today’s real estate, that same $600,000 house is listed at $80,000 lower. That puts the property at $520,000 with a monthly payment of about $2,600 per month, including the principal and interest. This may look similar to the previous payment, but at 20% down, you’re only putting down $104,000. If we compare the two, despite better interest rates, that same home earlier in the year is much more expensive.

On top of that benefit, sellers are also willing to pay for inspection items, pay fewer break fees, and a lot of other fees that they weren't willing to pay earlier this year because there was so much competition.

There are many opportunities for buyers to get into homes now. Interest rates are higher, but you’ll pay less money in fees and less money up front in general. Furthermore, you can always refinance within the next few years when interest rates go down.

We'd be happy to walk you through the math to let you know if the house you’re eyeing might be a good deal. Not every house and payment is perfect, but what I tell our clients right now is: if you like the house and if the payment makes sense, then you might as well take advantage of some of the great benefits of the current market we're in. If you have any questions about buying a home about the market in general, call or email me any time. I’d love to connect with you!