What Happens To The Real Estate Market If Rates Continue To Rise?

Mortgage interest rates have been pleasing to the pocket book of many for a while now so can we expect them to rise any time soon? And if and when they do, how high might they go and what will happen to the real estate market when they do? Should we buy or sell our current home? Should we rent instead of taking on a mortgage at this time? Honest questions posed by people who have become wary of the real estate market because of recent devastating results of a crashing economy all over North America.

Home ownership will always be preferable to renting
It would be nearly impossible to demonstrate an incidence when renting a place to live would be financially wiser than buying one. Unless you are one of the lucky ones who can afford to pay cash for your home, you will need to take on a mortgage loan and expect to pay for that home over a long period of time. That means you pay interest for all those years as well but the good news on that is seen at income tax preparation time. You claim that interest when filing taxes and realize a break in your taxes from that. Renters have receipts showing the taxes they paid along with a few tax deductible items purchased throughout the year and that is all they have to show for their money. Home owners have more options now for tax breaks on purchases made on home appliances and air conditioners that are energy star compliant, making it wise to upgrade to newer and more efficient equipment.

Saving by buying now can amount to thousands of $$$
In order to realize the potential savings to be gained by purchasing your home now, consider the fact that current interest rates have not been as low for decades and may not see the present rate of 5-6% again for a long time. This low rate of interest means you pay less each month on mortgage interest, which is a significant portion of that monthly payment. True you will be rewarded for paying more in interest come tax time, but who wants to borrow their own money then pay interest to get it back? Buying now while interest rates are “comfortably low” can save home buyers, on average, annually anywhere from eight to ten thousand dollars or even more depending on the amount of home purchased.

ARM or fixed rate mortgage?
Those who choose to buy with an ARM or adjustable rate mortgage can benefit from current interest rates but beware of the expected rise in rates due to come soon. If at all possible, buy where you can get a fixed rate mortgage and you will be secure in the knowledge that your rate of interest will remain the same for the lifetime of your mortgage loan. Selling now when you’re rate of interest is high could benefit buyers who can change over to take advantage of current low interest rates. Paying off that old mortgage upon sale will save a lot but consider all you have already paid in interest since first purchasing that home years ago at the higher rate. Those who do choose to rent rather than buy can benefit from not worrying about paying the mortgage or making necessary repairs if they lose their job or find their job downsized as has happened far too often over the past two or three years. Renters can be more flexible regarding where they live and don’t worry about selling off the albatross that is holding them back when another job opportunity presents itself many miles away.