Here are three easy methods to deal with rising interest rates.
“I want to purchase a home, but how can I deal with higher interest rates?” Many clients have reached out to ask us this question recently. Interest rates have gone up about 2% to 3% since the beginning of this year. Rates are still low historically, but there’s no denying that recent increases make it more difficult to purchase a home. If you’re looking to buy, what can you do? Here are three tips to help you battle rising interest rates:
1. Improve your credit. You may think your credit score is already as good as it can be, but there is always room for improvement. Start by paying off your debt little by little. This will lower your debt-to-income ratio, which is what lenders use to determine your creditworthiness. You can also save up for a bigger down payment to improve your credit and lower your rate. The results may seem small, but even a tiny difference can add up to a huge amount over the course of a loan.
“The longer you wait, the more expensive homes will become.”
2. Pay mortgage points at closing. Also known as “discount points,” mortgage points are fees you can pay to lower your interest rate. One point typically costs 1% of your loan, so a point on a $400,000 mortgage would cost $4,000. A nice perk of mortgage points is that they might be tax-deductible. If you can deduct your mortgage interest, chances are you can deduct the cost of your mortgage points as well.
3. Interest rates are still historically low. During the last federal rate hike, rates were hovering at around 8%. Rates are still historically low, which is great news for buyers.
If you have any questions, don’t hesitate to reach out to us by phone or email. We can get you a list of properties in your local area. We look forward to hearing from you.
