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How to Prepare for the Impending Interest Rate Hikes

interest rates

All indicators are pointing to interest rate hikes in 2022. When, how much, and how many are still under speculation, but the one thing experts agree on is that they will rise. How can you prepare for the upcoming rate hikes?

home owner
  • If you are considering buying a home, now is the time. Work with your mortgage broker to lock in a low rate. Make sure the rate is fixed and won’t vary.
  • If you have your eye on a home, but the current owner needs a longer move out date, go ahead and purchase it at the lower rate and lease it back to the owner. A real estate professional can help you properly write up a contract with the specific details.
house debt
  • Pay off as much debt as possible, especially credit card debt and any sort of variable rate loans. These are the things that can get out of hand quickly and cause many financial problems that will  hurt you homebuying potential.
mom and son

On the other hand, rate hikes aren’t all bad for homebuyers. Last year’s soaring demand and low-interest rates sent prices rising beyond reach for many would-be homebuyers. Buyers found themselves in bidding wars and/or making hasty decisions. For most Americans, the main way of accumulating wealth is through homeownership and last year’s dramatic price increases squashed that dream for many. That is a problem that not even low-interest rates could fix. Experts don’t expect a dramatic decline in home prices, but the dramatic increases are forecast to tamper down a bit allowing a larger pool of buyers to become homeowners.

One thing is for certain, planning is crucial, so get with an agent, find a lender, and start planning. Stutesman’s Action Realty has a line-up of professional real estate agents ready to help their clients make that purchase or sell. Reach out today, 833.286.8400.

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The Effects of Current Mortgage Interest Rates

cash for house

You have seen the news; the housing market has more buyers than sellers creating a shortage of inventory for buyers ready to take advantage of those low interest rates. But why are the interest rates such a big deal when home prices are on the rise? Interest rates have a big role in making up a home’s level of affordability. Even with the increase in home prices, the low interest rates play a vital role in determining how much you will spend on your home in the long term. Quicken Loans has a great read about whether the home’s purchase price or interest rate is more important. In the article, they gave a great example of how important an interest rate is on a home’s affordability level even with an increase in home values.

house for sale

Janet purchased her home for $250,000 and paid 10% down resulting in a $225,000 mortgage. Her interest rate was 6% giving her a payment of about $1,349 per month for a 30-year mortgage. Paying the loan for the entire duration of the 30-year mortgage equates to a total of $260,363 in interest.

Janet sold her home to Joe for $300,000. He also put 10% down giving him a mortgage of $270,000; however, his interest rate is only 4% (a full 2% below Janet’s). Although he paid more for the home than she did, his monthly payment will only be $1,289 ($60 lower than Janet’s). In addition, he will only pay $194,048 in interest over the life of the 30-year loan. That is a whopping savings of $66,315 in interest expense. From this example, you can see that an increase in home prices does not necessarily equate to a home being unaffordable, which is why buyers are jumping on these low interest rates. In a nutshell, they are able to buy more house for less money.

yellow house

If you are thinking of buying or selling, the time is now. Sellers are getting top dollar for their homes and buyers are getting great interest rates increasing the affordability of homes. Although the Feds have indicated interest rates won’t go up until 2022, why wait? Your dream home could be waiting for you now! Realtor.com released the first quarter of 2021 housing stats revealing that “homes are selling at historical speed, with the time on market dropping to a low of 43 days.” If you are thinking of listing or selling your home, give Stutesman Action Realty a call, 833.286.8400 to reach one of the three offices located in Nevada, Missouri, Lamar, Missouri, and Fort Scott, Kansas.