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3 Empowering Reasons to Not Fear Buying a Home When Interest Rates Are So High

Buying a new home can open a completely new chapter of life that you and your family are about to embark on. Simply put, it’s a huge deal. Because of the weight that this transition carries, buying your next house is something that’s easy to talk yourself out of. Even when the economy is booming, you’re excelling at work, and you feel unstoppable – buying a home is intimidating. Now, imagine yourself in an economic landscape filled with uncertainty, job layoffs, and rising interest rates. Is it smart, or even possible, to buy a house right now?

Here are 3 empowering reasons to not fear buying a home when interest rates are so high.

1. Secure a Smaller Principal

There are many things in life that are entirely out of our control. As emotional beings, we allow these things to influence and dictate the internal dialogue we have with ourselves. This eventually affects our beliefs, which can bleed into our beliefs and actions. As homebuyers, interest rates are one of those things that are completely out of our control. Of course, when making decisions around them, it’s important that your decision is backed by financial rationale. However, in the grand scheme of things, you can still achieve your goal of buying a new home even when interest rates are high.

While interest rates are high – like in 2023 – real estate prices are dropping. This is a huge opportunity for first-time and repeat homebuyers. As prices drop, you can purchase a home for less than what it would have cost you a year ago. Although you would be paying a ‘higher’ interest rate on your mortgage, the overall principal on your loan would be far less. Additionally, the closing costs for sellers and buyers involved in the transaction will be less based on a smaller sale price. Securing a smaller principal on your mortgage with fewer costs involved can make buying a home when interest rates are high worth it. 

2. Buy a Home When Interest Rates Are High and Refinance

Although high interest rates are intimidating, they don’t have to last forever. Depending on the type of mortgage you borrow, there are usually options to refinance. Buying a home when interest rates are high is more digestible knowing you can refinance later. If you plan to take out a fixed-rate mortgage, you can likely refinance it once interest rates drop. A 7% interest rate loan doesn’t have to stay like that for the entirety of your homeownership.

This borrowing strategy can work out in your favor depending on how you time the real estate market. As mentioned above, there is an opportunity now to buy properties are lower sale prices than last year. San Diego real estate prices ebb and flow, meaning they will eventually go back up, likely superseding at-time-high prices. You can buy a house at a low price when interest rates are high and then refinance once the rates drop.

3. High Interest Rates are Relative

Interest rates are relative to your perspective and experience. For example, if you bought a house in 1981 with a mortgage, your interest rate was likely +16%. Compared to now, that is insanely high. Over the past few years, homebuyers experienced extremely low interest rates. While no one has a crystal ball, there’s a chance we don’t see rates that low again for a long time. The current interest rates may be more aligned with the ‘norm’ that we will experience moving forward. Don’t let high interest rates stop you from buying your next dream home. 

Anything Is Possible

While the odds may feel stacked against you when trying to save enough money for a down payment to buy your next house, know that anything is possible. Interest rates will continue to rise and fall throughout our lifetimes. We cannot control them, only adapt to them. Utilize strategies like timing the market, refinancing your mortgage, and securing low purchase prices when jumping into homeownership. Buying a house when interest rates are high is possible when following these strategies.

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Buying or selling a home is among the largest financial decisions a person makes in their lifetime. We are here to ensure that you are confident in your decision. Reach out, and let us show you how we can help!

John and Melissa Steele, San Diego Real Estate Agents

John and Melissa Steele