Why Now Is the Right Time to Buy—Even When Rates Are High
Florida mortgage experts on the Chris Doering Mortgage team come together for an open and insightful conversation about the current housing market. In an environment where interest rates remain elevated and consumer credit card debt is on the rise, many buyers are left feeling uncertain.
However, we break down the reasons why now could still be a smart time to buy a home. From long-term investment benefits to shifting market dynamics and potential refinancing opportunities in the future, they provide a well-rounded perspective aimed at helping buyers make informed decisions in today’s market.
What Happened to Mortgage Rates After the Pandemic?
When we were going through the pandemic, one benefit was that we learned how to get closer as a family. We all learned how to be a little more simplistic. Another thing we were able to take advantage of was all-time low rates. A lot of people were able to buy homes during the pandemic, locking in mortgages that were below 3% in some cases.
Chris Doering believes these low rates skewed the perspective of what a normal rate is. Right now, rates are in the low-to-mid sevens. Historically, that is very low compared to rates throughout the history of our country, but people don’t think of that as being a good interest rate anymore. People claim they’ll “never refinance again” because they have an interest rate in the high twos or low threes. Chris Doering emphasizes that one thing that has to be looked at is not only your mortgage situation but your overall financial picture.
Is Credit Card Debt Affecting Your Ability to Refinance?
Credit card debt is at an all-time high. As of quarter three in 2023, credit card debt topped $1 trillion—with a “T”. Some people don’t realize just how much that money is costing them when evaluating their own situation—the difference between their mortgage interest rate is at low 3% versus what they’re paying for credit cards.
Some families we work with are holding $100,000 in credit card debt with no end in sight trying to make the minimum monthly payment. You’re talking about a $2,000-$2,400 monthly payment just to meet the minimum credit card balance.
Right now, the average credit card percentage rates are about 26%. If you had $100,000 in credit card debt, you’re looking at about a $2,200 monthly payment, but that payment doesn’t chip away at the principal. You will continue to make that $2,200 monthly payment, but the debt isn’t going anywhere. And the accelerated rates have certainly put most families in challenging situations.
If you add in a $300,000 mortgage balance at 3.25%, you’re adding about a $1,400 payment. This, combined with the $2,200 credit card payment, is $3,600. This can put a lot of stress on your monthly budget.
If we put $400,000 into a mortgage at 7.25%, your monthly payment will be about $3,100. This gives you an extra $400 each month. More importantly, you’ve now moved that debt into a tax-deductible item.
Many people see buying a home as taking on debt. In reality, it is an investment in a savings account. It’s about creating an asset instead of a liability. That money you accumulated is yours.
We’re seeing property values still continue to stay the same or go up. It’s not like the 2009 situation where home values have crashed. Interest rates are a little bit higher, but the equity largely is there for a lot of the borrowers that we get a chance to talk to.
People need to be aware that you’re not tied to your house right now. Many people are afraid to move. However, you can argue that selling your house can help. You can use the money to pay off debt. You might also put down a smaller down payment on a new home. This can help you leave a house that feels like a burden, even with a lower interest rate.
Credit card debt and your credit score in general is a big factor used by lenders to determine your mortgage and refinance options. We want to explain to clients that every situation is unique. This is not a one-size-fits-all approach. It’s important for us to offer many options. We need to see what fits someone’s needs now and in the future.
Should You Refinance to Pay Off High Interest Debt?
The Chris Doering team are not tax professionals. You should always talk to your CPA or tax advisor about taxes. However, we do know that you can write off the interest on your mortgage for your primary home with no restrictions.
A good way for homeowners to take control of their financial future is by utilizing the money that they have in their home. Equity is your money and the equity that you have in your home is your money.
We have a lot of customers who think that they need to take the equity from the home they own now and put it into their next home when they’re selling. But sometimes, it benefits more to put down a smaller down payment and address some of these other credit card debts or consumer debts.
One option available to homeowners is using an equity line to pay off debt. This can be a powerful tool in certain situations, but not a one-size-fits-all. Equity lines are not as commonplace as they have been in the past. The IRS has changed some of the rules and regulations as far as using that interest as a deductible item. Equity lines that are not used to purchase a home are no longer tax deductible.
The reality is we’ve watched interest rates go up over the years, and so that’s what your lines of credit are typically going to be tied into: your prime rate. So you’re going to be getting your equity lines somewhere from 10-12%, which is going to be a much higher rate than you could if you were just to refinance the whole thing into an amortized loan for a shorter term.
With the lack of the mortgage interest deduction now, as well as those elevated rates, it’s often better to take the first mortgage, take that refinance, get the cash-out refinance, have the control, and not have to worry about whether or not prime rates are going to continue to go up. As the prime rate goes up, your payment is going to go up.
Halftime With Chris
Why Is Now the Right Time to Buy?
We believe that one of the intrinsic values of joy is not having to stress out about “how am I going to make my payments every month?”
The old statement about, ‘Oh, you only want to refinance when you take your interest rate down by a full point,’—none of that is true. That’s one of the myths that we’d like to debunk as well. It’s important that you take a snapshot of the financial picture, in general, to evaluate where everybody is, and I think that’s one of the things that we do really well.
It all comes down to experience. It all comes down to knowledge. It all comes down to, again, the origination platform that you have to make deals work, but we like to provide a lot of information to our clients. We like to give them options and see what fits best both now and in the long term.
We’d love to have the chance to sit down with you. We do offer free mortgage loan evaluations to take a look at not only your mortgage situation but the overall financial picture in general and see what we can do to help put you in a better position to accomplish your financing needs.
How Can I Get a Free Mortgage Loan Evaluation?
As you can see from this conversation, the Chris Doering Mortgage team is passionate about what we do, but we’re even more passionate about helping people out. That’s why we offer a free, no-obligation loan consultation to look at your entire financial picture.
We don’t see ourselves as loan originators—we see ourselves as mortgage planners. We analyze the overall situation you’re in now, talk through some of your goals, and come up with a financing plan that helps you achieve those both for the short term and the long term as well. Please, give us a call at (352) 244-0840, or fill out our contact form to secure your financial future with us today!