How should rising interest rates factor into your decision on whether or not to buy a home?

We have our ears 👂 to the ground here at Ironwood Homes. We don’t just build houses; we build homes where families can create beautiful memories together. And while we love to partner with you to make dreams into reality, we realize that interest rates have recently been increasing. What does that mean for you? 

Table of Contents

Do High-Interest Rates Automatically Mean No?

1. Real Estate is Still a Long-term Appreciating Asset

2. Buy the House That You Can Afford

3. Purchasing a House Today Starts Your Equity Building Journey

It’s Up To you

Do High-Interest Rates Automatically Mean No?

Deciding to purchase a home is a huge decision. We understand. You must ensure you know the whole process and that you are going into it with your eyes wide open. Michelle Lerner at the Washington Post notes how rates have gone from 3% to 7% between 2021 and 2022. So yes, rates are very high at the moment. Will they stay high forever or go down again? Will property values appreciate or depreciate? All of this should go into your decision-making process. Here are three things to keep in mind as you make your decision.

1. Real Estate is Still a Long-term Appreciating Asset

Buying and holding have historically been a winning strategy with a fixed mortgage rate amortized over 30 years. Real estate will continue to work for you year after year. BB French, Senior Real Estate Advisor at Sagareus, gives ten great reasons why real estate will help you in the long term. While the cost might be high now, it will pay dividends.

2. Buy the House that You Can Afford

It might seem obvious, but you should only buy the house you can afford. What do we mean? It is not uncommon to get a loan approval that fits within your gross income but does not accurately consider all of your spendings. In other words, just because the bank says you are approved for $300,000 does not mean you can afford it. You might only be able to afford a $200,000 loan. The bank 🏦 will not tell you this. Chase explains the 28% rule and how it should inform your decision. Remember, exercise wisdom in your purchasing decision irrespective of the time frame.

3. Purchasing a House Today Starts Your Equity Building Journey

Building equity is exciting! It is a sign that you are making sound financial decisions. Buying your own home starts you on the journey of paying off this long-term asset. And in doing this, you are not paying off someone else’s through renting. You are in control. Essentially, home ownership is putting money back in your pocket each month. American Family Insurance gives us six terrific ways to build home equity 🏠. 

It’s Up To You

At the end of the day, it is up to you. How much risk are you willing to take? Could the rates continue to climb 🧗‍♂️? It’s a good chance, yes. Will your property value appreciate? Maybe, maybe not. These are risks you have to weigh. We are here to help you. We are on your side and want to provide any counsel we can. Know that you always contact us. Remember that you are spending your hard-earned money 💵 whether you buy now or continue to rent. Through renting, you are paying off a mortgage, just not your own. If you own your home, you will be chipping away at your mortgage one month at a time.