Patrick Iturra Report, EIG Asset Manager. Tuesday, Mar 15, 2022
Mortgage rates were at the lowest during the year 2020-2021, but right now, they have been on the rise in 2022.
Currently, the 30-year rates will jump by 4% this year; Although this is low compared to the interest rates a few years ago!
Most people think that the rising mortgage rates are not a good sign, and they assume that this is not the right time to buy real estate.
However, the following article is dedicated to helping you with your real estate buying journey in the current rising mortgage rates.
To under this better, I am going to share an example for you :
Let’s say that Matt has been on the hunt to buy the right house for his family. Suddenly he gets the news from his wife that the mortgage rates are going to go up!
He does all the research and finally chooses a house and buys for a $250,000 loan against an interest rate of 4.2% for a 30-year long term.
Matt is very happy as he cannot believe that he got the house for such a low-interest rate.
If you have not been following the real estate market, this might come as a shock to you. How come the interest rates are so low?
The fact is the entire United States had all-time low mortgage rates for the past two years, but this will change in the long run!
I want to clarify that the low mortgage rates show that the economy is struggling. The majority of this is due to 2020; just after the COVID 19 pandemic started that killed a lot of businesses, people lost their jobs. Therefore, federal funds interest rates were decreased to 0-0.25%. This was the lowest throughout the entire 2020 and 2021!
But, now, the mortgage rates are going to rise in 2022. The main reason behind this is that the US economy is recovering from the damages of the COVID -19 Pandemic. Also, there are more jobs for people coming back to their jobs. On the other hand, the inflation rate is also declining.
This is good news, but I have been getting inquiries from people looking to buy real estate, saying they cannot pay the high-interest rates.
As a real estate investment advisor, I help all new homebuyers with this! I am here to help you all with the interest rates, and what’s this is the right time for you to buy a home oZillow’sLet’s here’s it goes!!
As per the popular platform Zillow’s data, Here’s a quick overview of the current mortgage rates in the united states:
Current Mortgage Rates
|
Duration/Type of Mortgage |
Interest Rate |
| 30-year fixed | 3.92% |
| 20-year fixed | 3.59% |
| 15-year fixed | 3.12% |
| 7/1 ARM | 3.48% |
| 5/1 ARM | 3.36% |
| 30-year FHA | 3.13% |
| 30-year VA | 3.31% |
As we can see, the mortgage rate for the 30-year-old term is around 4%. Now, this used to be about 3% in 2021.
This difference means that many people looking to buy a house right now have missed the opportunity to buy one house at a relatively lower interest rate.
Although this mortgage rate is set to be lower, the expectations for mortgage rate were as low as 5%.
How much will the mortgage rate increase in 2022?
Mortgage rates are already on the rise, and it is quite a big possibility that they might increase over time. The Federal Reserve (FED) is expected to increase the interest rate further.
Multiple factors might lead to an increase in interest rates from the FED. Few refer to the impact of the new wave of COVID 19, tensions due to the Russia-Ukraine conflict. Due to this, the economic growth will be slow, and the mortgage rates will increase over time.
As per my experience, the rate might go up to 4.5% in 2022. But, if there is an economic slowdown with rising inflation; Then, there are chances that the interest rates might go down to as low as 3% in late 2022.
How will the rising interest rate impact the buyers: Everything you should consider in 2022
It would be best to consider multiple factors before buying a house, such as mortgage rates, loan terms, etc.
Most buyers have become used to the low-interest rates over the past two years. If you are looking to buy a house right now, you have to decide right now; This is common because of the spike in interest rate!
But, should you consider buying a home because of the interest rates?
No, it would be best not to consider buying a home because of the interest rates. Over the period, interest rates will go up and down; there is nothing to panic about. I would say that now is the right time to buy a home.
Yes, the interest rates will increase your monthly payment, but only by a bit of margin.
For example, the interest rates were around 3% for 30 years during the past months. If you had bought a home at that price, then you would have to make a monthly payment of $1,015 against a loan of $200,000 with a 20% downpayment.
Suppose you buy the home at a 4% interest rate for the same house against a loan of $200,000 with a 20% down payment. In this scenario, your monthly payments would be around $1,066.
As you can see, there is a difference of only $51. You can do the maths yourself for any amount, but the difference will not be very high.
How do you cope with the rising interest rates?
With the experience of more than 25 years, I can say that make sure that you buy the right real estate!
Let me explain; interest rates are going to spike over the period! As the American economy recovers, the interest rates will continue to go higher and higher.
But, this should not stop you from buying your dream house. Instead, it would be best to plan and then buy the house. I can take you through the entire process to identify and buy the right real estate for yourself.
Call me if you want help/advice on buying the right real estate or how to acquire real estate to generate constant passive income!
As an Asset Manager, I have a vast network of Real Estate Brokers and professional agents who are part of myDon’tort network to provide you with excellent service. Don’t hesitate to contact me here; I’m here to help you!
Patrick Iturra,
Asset Manager for Estate Investments Group. My job is to lead the construction, operations, and leasing teams of your real estate investment company to ensure the optimal value of each asset. I monitor the real estate performance of my investors and maximize their real estate income.
