Buying a home can be a bit of a gamble but, it’s also one of the best investments you’ll make in your life assuming you do your homework. Maybe you buy a home and find out all the wiring has big problems so you have to hire an electrician to come in to completely redo it all. Or, maybe you find out you’re located on a floodplain and your basement gets soaked the first spring you live there. But, maybe…none of those things happen at all and your extreme worry was for nothing. The worst experience you might have as a home buyer in today’s market could very well be that you wait too long before putting in an offer on a home and someone else scooped it up instead.
The last example is very common because people think that if they wait longer, they will get a better deal. However, that’s a huge risk to take, especially if you’ve stumbled upon your dream home. So this sparks the question of whether you should buy a house now, or wait for interest rates to go down.
The rise and fall of interest rates…
Interest rates can impact the cost of a mortgage, and a lower interest rate can mean lower monthly payments and potentially lower overall costs when buying a home. However, interest rates are just one factor to consider when deciding whether to buy a house or not. Housing prices, your financial situation, and the state of the real estate market in your area should also be considered.
It’s important to remember that predicting interest rate movements and timing the market can be difficult. Interest rates can be influenced by a variety of factors, including global economic conditions, inflation, and central bank policies. It’s also worth noting that while interest rates are currently low, they can fluctuate and may rise in the future.
Typically, higher interest rates mean less competition in the market.
If you’re a homeowner that had trouble getting pre-approved for a mortgage, or a first-time home buyer, it may be a good time to buy a home now that there is less competition between you and other established homeowners. Right now, the market is in the buyer’s favour. That means you have more time to establish your down payment, negotiate terms on the home, get a home inspection, and be ready to put in an offer you know you will be able to finance.
But first, you need to get pre-approved for a mortgage when interest rates are high
When interest rates are high, it can be challenging to secure a mortgage with favourable terms. However, there are many options I can offer you as an experienced mortgage broker which banks cannot. These are a few tips for you I have found to help the average home buyer improve their mortgage application so that they can secure the best interest rate possible.
- Improve your credit score:
A good credit score is an essential factor when applying for a mortgage because the better your score the lower your mortgage rate. By paying your bills on time, reducing your debt-to-income ratio, and disputing any errors on your credit report, you’ll be sure that your score is the best that it can be.
- Consider a shorter loan term:
Although a shorter loan term may mean higher monthly payments, it can also mean lower overall costs because you will pay less in interest over the lifespan of the loan. To learn more, check out this article that explains the difference between shorter vs longer amortization periods when it comes to your mortgage.
- Consider a fixed-rate mortgage over a variable-rate mortgage in case interest rates increase even more:
With a fixed-rate mortgage, the interest rate remains the same throughout the term of the mortgage, which can provide stability and predictability in your monthly mortgage payments.
If you opt for a variable-rate mortgage, your interest rate will fluctuate with changes in the market, which can make it difficult to budget and plan for your mortgage payments. In a rising interest rate environment, this can lead to higher monthly payments, which may become unaffordable.
However, it’s important to note that fixed-rate mortgages typically have higher interest rates than variable-rate mortgages, and you may end up paying more in interest over the lifetime of the mortgage. This is why you’ll need to consider your financial situation and goals to determine if a fixed-rate mortgage is the best option for you specifically.
- Look for alternative lenders with the help of your mortgage broker to get the lowest interest rate possible
Remember, securing a mortgage is a complex process, and it’s important to consult with a mortgage professional, like myself, Darren Robinson, who can guide you through the process and help you make the best decisions for your financial situation along the way. There are so many other options available that banks and traditional lenders don’t talk about. I can provide you with personalized advice based on your circumstances and financial goals plus, there is no cost to you for working with a mortgage broker. Give me a call at 705-315-0516 or sign up for a free no-obligation consultation and let’s talk about your home-buying options in detail.