There’s One Big Reason Not to Wait for Lower Mortgage Rates

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You could end up regretting your delay.

Key points

• Mortgage rates are up considerably since the start of the year.
• Some home buyers may consider waiting for rates to drop.
• This could be a big mistake considering you could refinance in the future.  

Mortgage rates for a 30-year fixed-rate loan are above 5.70% right now and are likely to climb higher. Since rates were below 3% for the same loan not too long ago, some homeowners may be reluctant to buy a property because loans have become so much more expensive.

While it may seem like it would make sense to put off a purchase until mortgage rates drop, there’s one big reason that would-be home buyers likely should not do that.

Here’s why waiting for lower mortgage rates may not make sense

There’s one simple reason why you likely should not put off buying a home just because mortgage rates are high right now. 

If you get a mortgage loan at a high rate, you’ll likely have the option to refinance your home loan if it turns out rates drop. But, if you wait to purchase a property in hopes that rates will come down, you can’t go back and retroactively undo your mistake and borrow at today’s rates if that doesn’t happen. 

No one can predict where rates will go. But with the Federal Reserve likely to raise interest rates again to fight ongoing inflation, the most likely outcome is that rates will keep going up for the foreseeable future. 

You don’t want to look back and regret not borrowing now at today’s prices if home loans just keep getting more expensive. And if rates do happen to fall, refinancing should be a simple matter of shopping around and securing a new loan at the reduced rate. 

Should you buy a home at today’s rates? 

Mortgage rates have a huge impact on the cost of buying a home, but ultimately they should not be the key deciding factor in your decision about whether to buy a house. 

Mortgages are typically less expensive than most other kinds of debt due to the fact they are secured loans. And interest can be tax deductible for those who itemize on their taxes rather than claiming the standard deduction. Plus, homeowners generally end up with a higher net worth than renters since paying down a mortgage loan allows you to acquire equity, and you end up owning a valuable asset while paying rent doesn’t do that. 

You don’t want to put off owning a home forever and losing out on the wealth-building benefits of ownership in hopes that rates decline. That’s especially true since you have the option to fix things later by refinancing if it turns out you got a mortgage at the absolute worst time, but you do not have the option to go back in time if it turns out that rates go up instead of down. So the key thing to think about is whether you are currently financially ready.

If you have good credit, minimal other debt, a generous down payment, and money saved for emergencies, moving forward with buying a home even with a higher-rate mortgage loan could still be the right choice in the end. You just want to make sure your loan payments will be affordable for you now and in the future — even if that means buying a slightly smaller house than you were hoping for. 

Once you’re into your home, you can begin building equity and can watch to see if rates go down, at which time you can choose to act to lower the cost of your home loan.