If you’re a homeowner wanting to buy your next home, you might be feeling reluctance to trade your existing interest rate for a current mortgage rate. It’s easy to understand when mortgage rates are double from what they were a few years ago. Historically speaking, mortgage rates are actually closer to what would be considered more of an average range than the Fed manipulated rates of years past.
I may have some good news for you. No, it’s not a trick…this can actually be a treat!
If you’re a homeowner wanting to buy your next home, odds are you may be sitting on quite a bit of home equity due to current home values. Selling your home allows you to take advantage of the trapped equity and use it for the purchase of your next home. The home equity can be used for:
- larger down payment to reduce your monthly payment,
- buying down the interest rate with discount points,
- paying off high interest rate debt to reduce your total monthly payments,
- all of the above!
I am a big fan of taking advantage of the potential proceeds from a sale of a home to eliminate high interest rate debts. A debt payment (such as a car) of $720 equals about $100,000 to qualifying for a new home. In other words, paying off debt that has $720 in monthly payments means you may qualify for $100,000 more.
Plus, home values fluctuate depending on the markets and are not guaranteed. Higher home values are a window of opportunity for home sellers.
Another reason to consider buying your next home before mortgage rates start to trend lower is that we’ll see more people who have been waiting to buy, enter the market. This increases demand and pushes home prices higher.
Do you think buying and selling at the same time is haunting? I’m here for the rescue! We have a cash buyer program that allows you to buy your next home as a cash buyer before your current property has sold. It works like a bridge loan but I personally think it’s better than a bridge loan as you’re not having to qualify with a bridge loan payment.
If you qualify for your next home with today’s rates, you can refinance later when rates move lower. MBA’s October 2023 forecast predicts interest rates will hit the 5% range the 1st quarter of 2025. While you’re waiting for rates to move lower, you’re gaining appreciation, building equity (from paying down your mortgage) and enjoying your home instead of waiting for rates to come down and the home price to move higher. As inflation continues to improve, so will mortgage rates.
Bottom line, if you’ve been feeling trapped in your home because you don’t want to part ways with the low interest rate, please reach out to me so we can review your possible options. Even if buying a home is a year or two away, you cannot start reviewing your options too early. Let’s have a conversation!
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