High Interest Rates and Financing Workarounds
Our interest rates have recently risen, and they are projected to increase and peak during 2023. So, do higher interest rates lower home prices? Yes, home prices are lower, but this isn’t necessarily great news for home buyers. A rise in interest rates means monthly mortgage payments may increase for potential buyers.
High mortgage payments can make the milestone of buying a new home feel less enjoyable. After all, there’s already a fair amount of stress surrounding such a monumental purchase. However, there are accessible finance workarounds you should consider in this climate that can help you save money when buying a house.
Factors that affect mortgage rates
Federal Reserve decisions can directly impact mortgage rates, with mortgage payments rising because of high interest rates. Inflation also affects mortgage payments; an increase in inflation leads to high interest rates. Real estate searches become more complicated due to increased buyer expenses, but not all hope is lost.
Benefits of buying when interest rates and mortgage payments rise
Consider the benefits of buying a home when interest rates rise. Heightened interest rates reduce buyer risk and opens up more choices for buyers. In addition, many buyers are priced out due to higher mortgage rates, so if you can use workarounds to your advantage, you may get your pick of properties.
Financing workarounds to help the home buyer
There are plenty of alternatives you can try before succumbing to the effects of high interest rates. Various first-time home buyer programs are available to those seeking a specific loan. The bottom line is that real estate sellers want buyers, and you can be the ideal candidate for a home via a number of finance workarounds:
∙ Pay for the home with cash: If you’re able to pay for a home with cash, this can streamline the process, make the seller very happy, and help you avoid extra expenses, such as expensive mortgage payments.
∙ Seller financing: Reach out to the property seller and offer a mutually beneficial arrangement. If the seller serves as your lender, there is more room to negotiate terms such as interest rates, payment schedules, and the deposit amount. In cutting out the middle man, this could an extremely advantageous option—just be sure to consult a real estate professional prior to signing anything!
∙ Apply for a private loan: You can apply to an individual or company offering a loan that is different from a traditional mortgage loan.
∙ Apply for a government loan: If you qualify for a government loan, purchasing property can be more affordable. This is an excellent option for first-time home buyers who can’t spend too much on a down payment.
∙ Crowdsourcing: This very new method can be fruitful if strangers who take interest in your homebuyer journey are willing to help you financially.
∙ Choose a property with shared equity: When equity is divided between an investor and a buyer, each party agrees to specific percentages of property ownership. Investors typically contribute more in this instance, ensuring a smaller initial deposit for home buyers.
∙ Withdraw from retirement savings: If you must, tapping into your retirement savings could help afford a home during this time. However, consult financial experts before dipping into these savings, because some accounts may demand a penalty fee or other payments when you withdraw. If you have an IRA, there may be some home financing workarounds that allow you to withdraw certain amounts with the aim of buying a property with no financial penalty.
Recruit a trained professional to help you
When the process of buying a home becomes overwhelming, our trained real estate agents at Pan Florida Realty are here to assist you. The housing market is complex, and prices are driven by a number of factors, but the right agent can provide key insight into your local market. In addition, you can avoid falling prey to misinformation about loans when you do your research.
This special time shouldn’t feel weighed down by financial burdens. Pan Florida Realty agents know how to ensure a positive homebuying experience, so don’t hesitate to reach out with questions today.
