In my 20 years of working in the Mortgage and Real Estate industries the most ill informed statement I continue to hear is from potential homebuyers is:
“Mortgage Rates are Low – It’s a great time to buy a House”
Not only is this a misinformed statement – it’s just simply untrue!!! Most often this is an ideology that is perpetuated by the collusion of mortgage and real estate brokers. Since they only make money when you purchase a home.
That being said, if you’re buying a home as your primary residence, then there should be one main reason motivating you. Simply put, it is because you can afford the expense of becoming a homeowner and you can afford your mortgage payments.
Contrary to popular belief mortgage rates are probably one of the least important factors to determine if home ownership is right for you. It is unfortunate that a lot of potential homebuyers are believed into thinking that rates are so important. True, we all want to get a competitive rate, however if you are buying a home just because the rates are low you may be headed for trouble.
Let’s Look at some Numbers –
A $400,000 30 year fixed rate Mortgage at 4% will give you a monthly payment of $1,908
A $400,000 30 year fixed rate Mortgage at 5% will give you a monthly payment of $2,144
That’s a difference of $236 a month, of which all of that can be deducted from your taxes. Therefore, at the end of the day, you will be able to get a tax refund of the additional monies spent on your mortgage payment so the slight difference has no actual effect.
The primary factor to consider if you are going to buy a home is that you can afford your mortgage payments. Even if you buy a home when the rates are higher you can always refinance your mortgage when the rates go down giving you a lower monthly payment.
The more accurate way of assessing mortgage rates is:
“Mortgage rates are low – Now is the time to refinance your Mortgage”
The Veterans Homebuyers Network – leaving no Soldier Behind