Why Interest Rates Matter: Timing Your Purchase
“The Times They Are a-Changin’ ” - Bob Dylan
When purchasing a home there are many things to consider. Aside from the basic questions, how am I going to get my 70inch flat screen on this wall!? There are a ton of other questions to ask, and some are not so obvious…
One of the most frequent questions Real Estate Agents get from potential clients is “how is the market?” It’s probably one of the vaguest questions you’ll ever ask, however, the answer can speak volumes for you and your investment. There are many things that dictate the market: unemployment rate, cost of living expenses, interest rates.. Wait!? Go Back, did you say interest rates? I sure did! You might ask, “why would interest rates affect my ability to buy or sell a home!?” The answer is not so much your ability, but it all comes down to timing.
First, class is now in session: a little history lesson on interest rates. Interest rates commonly fluctuate, and are distributed by the federal reserve. Why does this matter? Because as interest rates change, so can your mortgage! For instance, back in the 1980’s interest rates hit a historic high of 15%! While back in 2008 after the financial crisis and financial meltdown, the Fed lowered interest rates to 0% essentially freezing the economy to focus on rebuilding financial institutions from the ground up. Due to the uncertainty of fluctuating interest rates, it is always a good idea to go with a fixed loan instead of an ARM (adjustable rate mortgage). This way you are locked into the same rate over the course of your mortgage. Whether it is 15 or 30 years down the road you’ll still be paying the same interest on your loan.
Interest rates don’t just dictate how much your mortgage can be, they can also affect inventory and even home values. Think about it, would you want to sell your home if you knew you wouldn’t be getting top dollar for it? And vice versa would you want to look for a home knowing you would need to pay more interest on a loan compared to previous years? What I’m saying is that if you are thinking about buying a home do it now, before interest rates start to climb. This way, you are locked into a good interest rate over the course of your 30 year mortgage. Currently, interest rates are around 4-5% however the Fed is set to raise interest rates two more times in the upcoming year.
So maybe you’re not sure if you’re in the position to buy. That’s where OakTree Realty comes into play. Drop us a line, send us a letter, or send us a message on facebook. We’re here to help get you and your family in a good position not only now but for years to come. As Bob Dylan once wrote, “ The times are a-changin’”, what will you do to prepare for your investment future?