Affording a Home with Rising Mortgage Rates — 3 Great Tips
Sep 01, 2022 brooklyn,Brooklyn Buyers,Brooklyn Buyers Agent,brooklyn real estate,brooklyn realty,Buying in Brooklyn
If you’ve been looking for a home in the past few months, you’ve almost certainly felt the impact of rising interest rates. Rates have more than doubled, making your estimated monthly payment significantly more. And it seems like these pesky percentages aren’t done increasing, either.
So, how can you afford a mortgage with rapidly rising interest rates? We’ll share some of our best tips in the post below.
Look Into Hybrid Rate Mortgages
We’ve all been warned to stay away from adjustable rate mortgages, because their rates can rise significantly month after month. But right now, there are a few good “hybrid rate” options, where your originally low-interest rate is locked in for 5, 7, or even 10 years.
Some of these mortgages are currently sitting near 3%, which could save you hundreds of dollars per month compared to the current fixed mortgage rates. You could plan to refinance next time rates hit historic lows and avoid the adjustable period all together.
Just make sure you understand all of the fine print. You don’t want a surprise, giant bill coming in the mail a few months down the line.
Boost Your Credit Score
If your credit score is lower than you’d like, it may be holding you back from today’s best interest rate. Scores below 700 can especially be affected by added points.
The best tips to bring your credit up include:
- Looking through your report to make sure there are no errors.
- Paying down credit cards if your debt ratio is higher than about 15-30%.
By bringing your score above 700, you could see nearly a point drop in your given interest rate, and that’s definitely a number that you’ll feel coming off your mortgage payment each month.
Purchase Points if You Can
Interest rates can actually be bought down a little bit with points. One “point” costs 1% of your loan, so $10,0000 for a $1 million home. They typically decrease your rate by 0.25%.
This is a large cost upfront, but it saves you money over the life of your loan. And if you’re looking for a better interest rate and a lower monthly payment, it will make at least a small difference for you.
Current fixed mortgage rates may be rising, but you don’t have to feel helpless. Use the tips above to bring your rates —and monthly payments— down a bit. And don’t forget that rates are still far lower than they’ve been in years past. Feel free to reach out at any time for questions, advice, or conversation. At Realty Collective, we love to help out however we can.