For generations, people have begun their homeowner experience with a "starter" home. Part of the logic may be that by starting with a smaller home, they can learn what it takes to own and maintain a home, and discover some of the unexpected costs that come along with it. A slightly longer view into the future could suggest a different strategy.
As of March 4, 2021, the average 30-year mortgage rate according to Freddie Mac was 3.02%; up 0.37% from the week of January 7th this year. At this same time in 2020, the rate was 3.29% and in 2019, it was 4.41%. That is a difference of 28 and 139 basis points, respectively.
The principal and interest payment on a $300,000 mortgage would have been $236 higher two-years ago and $44 more one-year ago. Today's low mortgage rates are saving buyers lots of interest especially when you factor in the median tenure for sellers is approximately ten years. Even though prices have increased over the last two years, some people may be able to afford more now with the lower interest rates.
Anticipating your future wants and needs now may present some opportunities for preparing for the inevitable. By purchasing a larger home today, a buyer can lock in today's low rates and prices to allow themselves room to grow without the expenses of moving.
Each time you sell and purchase a home, there are expenses associated with each of these transactions. Purchase costs could be 1.5% to 3% while sales expenses could easily be 2.5 times that much. These expenses lower the value of your equity.
Instead of looking at the low mortgage rates as generating savings from the payment you might normally have to make, consider it an opportunity to purchase more home that will possibly meet your needs for a longer time, while also eliminating the cost of selling and purchasing in the transition from starter home to “upgraded” home.
My Highly Recommended Loan Officers
Doug Fouts, VP of Mortgage Lending, Guaranteed Rate Affinity LOANS
4701 W Parker Rd, Ste 650, Plano, TX 75093
cell: (972) 679 3807,
Amy Menius, Mortgage Loan Officer, Supreme Lending
5851 Legacy Circle, 6th Floor, Suite 6044 Plano, TX 75024
cell: (214) 704-5417
Jorge L. Madrid, Producing Branch Manager, Supreme Lending
2727 Lyndon B Johnson Fwy, Ste 220, Dallas, TX 75234
cell: (918) 671-5669, Office: (972) 810-3160,