Author: David Armenta
Date: 4-30-2023
Short answer is to marry the home and date the rate by refinancing later when the equity is cashed out and the tenants pay the new loan.
Mortgage loan interest rates can have a significant impact on home buyers' affordability and the price of homes. When mortgage rates are low, it can be easier and more affordable for home buyers to obtain financing for a home purchase, which can increase demand for homes and drive up prices. Conversely, when mortgage rates are high, it can make it more difficult and more expensive for home buyers to obtain financing, which can decrease demand for homes and put downward pressure on prices.
One of the primary ways that mortgage loan interest rates impact home buyers is through affordability. Mortgage rates are a key component of the overall cost of a mortgage, and lower rates can make monthly mortgage payments more affordable. This means that home buyers may be able to afford a more expensive home with a lower interest rate than they would be able to with a higher interest rate. For example, a home buyer may be able to afford a $300,000 home with a 3% interest rate, but only a $250,000 home with a 5% interest rate.
Lower mortgage rates can also make it easier for existing homeowners to refinance their mortgages, potentially freeing up more disposable income for spending on other things, which can have positive effects on the overall economy. This can also increase demand for homes, as homeowners may choose to use their refinanced mortgage savings to upgrade to a larger or more expensive home.
On the other hand, higher mortgage rates can make it more difficult and expensive for home buyers to obtain financing, which can decrease demand for homes and put downward pressure on prices. This can also impact existing homeowners who may be considering refinancing, as higher rates may make it less cost-effective to do so.
Historically, mortgage interest rates in the United States have varied widely, often in response to changes in the overall economy and monetary policy. In the early 1970s, the average 30-year fixed mortgage rate was around 7%. However, in the late 1970s and early 1980s, mortgage rates spiked along with overall interest rates, with average 30-year fixed rates reaching a high of over 18% in 1981. This had a significant impact on the housing market, as fewer home buyers were able to obtain financing at such high rates.
In the 1990s and early 2000s, mortgage rates were generally lower, with average 30-year fixed rates ranging from around 6-8%. Following the 2008 financial crisis, mortgage rates fell to historically low levels as the Federal Reserve implemented policies to stimulate the economy. The average 30-year fixed mortgage rate hit an all-time low of 2.65% in January 2021. This low rate environment helped to fuel a surge in demand for homes, as home buyers took advantage of the low rates to purchase homes or refinance existing mortgages.
In recent years, mortgage rates have been rising gradually, although they remain relatively low by historical standards. As of April 2023, the average 30-year fixed mortgage rate is around 6.89%. While this is still a relatively low rate, it is significantly higher than the all-time low reached in 2021. As rates continue to rise, it may become more difficult for some home buyers to afford homes, which could put downward pressure on home prices.
In conclusion, mortgage loan interest rates can have a significant impact on both home buyers' affordability and the price of homes. Lower rates can make it easier and more affordable for home buyers to obtain financing, which can increase demand for homes and drive up prices. Conversely, higher rates can make it more difficult and expensive for home buyers to obtain financing, which can decrease demand for homes and put downward pressure on prices. Historical mortgage interest rates have varied widely over time, and current rates remain relatively low by historical standards.
