If you do plan on using the equity to keep climbing the real estate ladder, it may take longer than you think. Throughout Covid, I had numerous conversations with friends who very excitedly told me about all the new equity in their homes thanks to a steep rise in home prices across the country. However, they soon realized that all homes in their area had similarly increased in price, so they wouldn’t actually be able to leverage it into a bigger or nicer home.
Those who were lucky enough to lock in mortgages at rates of 2% or 3% should hold onto them as long as possible. Those who are looking to purchase at current rates should find some comfort in the fact that it can certainly be worse, and look for an opportunity to refinance in the future.Broadly speaking, mortgage rates only factor into the decision around whether it is a good time to purchase a home because they will influence your monthly payment.
Nearly everyone underestimates the all-in costs associated with owning a home. In addition to the monthly mortgage payments, don’t forget to include property taxes, homeowner’s insurance, HOA fees, and a budget for ongoing repairs and maintenance, which tend to run between 0.5%‑1.0% of the purchase price annually .
Sure, there is economic data around housing inventories and home starts, but today’s price, relative to yesterday’s price or tomorrow’s price, matters a whole lot less than how long you plan on staying in the home.
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