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“Is now still a good time to buy a house after interest rates have risen?”

Today’s question comes from a reader concerned about the timing of buying a house.

 

The question is:

“Is now still a good time to buy a house after interest rates have risen?”

Transcript:

Just this week a very prominent online financial blogger and investment advisor stirred up a debate by telling a prospect flat out – do not buy your first house right now.

I think this is bad advice in general.

The decision to buy a house is dependent on many factors, one of which is the monthly payment that you can afford, which is partially determined by interest rates. As mortgage rates rise, so will your monthly payment.

But trying to time a home purchase by guessing which direction interest rates may go is a fool’s errand. Obviously, no one knows where they will be tomorrow, or next week or next year.

And, actually even if you buy a mortgage now and interest rates fall, you will very likely be able to refinance into a lower rate.

Mortgages and interest rates are one of the few areas that are win-win in a way for consumers. Buy today and interest rates rise, you can be happy you got in at a lower rate. Buy in and interest rates fall, and you will be able to refinance.

 

So, basing your home buying decision on interest rates is the wrong move. What you do need to consider is what you can afford to pay each month and stay within that budget, whether you have a large enough emergency fund to handle all the joys of homeownership, and getting the right kind of mortgage.

As a very general rule, keep mortgage costs under 30 percent of household taxable income, be able to have at least a few thousand dollars in cash ready for repairs, and beware of others costs that will be included in your mortgage, such as adjustable interest rates, PMI insurance, and loan origination fees.

For more, check out:

Mortgage Cost Comparison Calculator - For Adjustable or Fixed Rate - Compare Total Cost, Monthly Payments, and Interest Expense

Matt Hylland