Today’s mortgage headlines make it very easy for first time home buyers to develop cold feet while playing the dating game. With media headlines such as; Mortgage rates inch up after a big plunge last week. Rates ‘will likely trend down in the coming months,’ Freddie Mac says. , It can be easy to fall into the dating trap and wait longer than one needs to, but what would you do if I took the time to explain “Marry The Home and Date The Rate?”
“Marry The Home” screams commitment and that can sometimes be overwhelming but it does come with some great benefits. Benefits such as; the appreciation of the home. Historically data shows that the housing market is always on the uprise; Historical US Home Prices: Monthly Median from 1953-2024. Therefore in my professional opinion the ideal time to buy or “Marry The Home” is as soon as one can afford the home. Unfortunately most people will spend a fair amount of time waiting and playing the “Date The Rate” game. So let's date, and take the national appreciation rate of 6.5% per year, and let's say that if one is to buy their first home at $800,000 cash, at the end of their 1st year of home ownership one would gain $52,000 in appreciation. Great option, right?
But let's date some more and think about purchasing the same home for $800,000 at a 6.989% (30-yr fixed) with a 20% down, mortgage loan. This option would cost one a yearly mortgage payment of $51,036, considering the appreciation rate of $52,000 a year this is still not a bad option.
Now let's say that you wait and wait for rates to come down and in a year mortgage loan rates do come down 1%. Then you finally commit and ask the mortgage loan company for the same loan in order to purchase the same home that now costs $852,000. Therefore $852,000 at a 5.989% (30-yr fixed) is going to cost a yearly mortgage payment of $48,972. So with that all in mind stop dating the rate and marry the home!
It makes no sense to continue to wait for lower interest rates of 1% to .5% in order to save $2,064 when data shows home prices are traditionally on the rise.