Buy a home now and refinance it later? Here’s what the experts think

when Inflation cools down, interest rates remain high, hampering Americans’ plans to buy a home or refinance their existing mortgage. A natural question many homeowners are asking themselves in this economic climate: Should I buy a home now with a higher rate and refinance later, or should I wait for my rate to drop? We posed the question to several real estate and mortgage professionals and academics, and their answers may surprise you.

If you’re thinking about buying a new home or refinancing your current one, it helps to know what rate you might qualify for. Find out here now!

When buyers should buy now and refinance later

Robert Johnson, a professor at Creighton University’s Hyder College of Business, points out that purchase price and mortgage rates are the two primary financial factors potential homebuyers consider when purchasing a home, but there is an important difference between the two.

“What many fail to realize is that only one — the mortgage rate — can be renegotiated,” Johnson says. “Once a home is purchased, you cannot renegotiate the purchase price. What this means, in my opinion, is that if you find a home that you believe is priced attractively, I would be more apt to pull the trigger than the mortgage rate. . Looks attractive and the home is priced high. In financial terms, you have the option for the remainder of your mortgage to renegotiate the terms. You don’t have that option with the purchase price.”

As the saying goes, “Marry at home, but date the loser.”

Additionally, you can experience other unique benefits if you buy a home in the current climate. “Buyers who are in the market when interest rates are high may have some advantages they wouldn’t otherwise, such as less competition and more negotiating power,” said Afifah Saburi, senior researcher at Veterans United Home Loans. “While they have the option to refinance, potentially multiple times throughout their 15- or 30-year mortgage term, they also have the opportunity to build equity and wealth.”

As with many financial questions, the answer may not be cut and dried, as it will depend on your financial situation and forces beyond your control. For example, it is difficult to consider Bail rate It is not clear which way they will go when it comes to a financial decision.

It’s hard to predict whether to buy now and refinance later or take a wait-and-see approach, says economist Peter C. Earle of the American Institute for Economic Research. “Typically, the rule of thumb is that no one will finance unless the new mortgage rate to lock in is at least 0.75% to 1% lower than the established rate,” Earle says.

“The Fed has been very vocal about their intent to keep rates at current levels once their hiking campaign is over, but if the U.S. enters a recession, it’s not at all clear that they won’t cut rates. That’s been their playbook since the Greenspan era,” U.S. Earle said, referring to Alan Greenspan, the former chairman of the US Federal Reserve.

Not sure if you qualify for the purchase rate? Explore your rates and options here now to learn more

While buyers have to wait until rates are lower

Whenever you buy a home, the decision should be based on sound finances, such as whether you can afford the payments and how long you plan to stay in the home long-term.

Brian Wittman, owner and CEO of SILT Real Estate and Investments, cautioned: “I don’t believe in the philosophy that buying now and refinancing later is the best move. We’re still uncertain about the direction of the housing market, including both property values ​​and interest rates. This particular The problem with the philosophy is that buying now and hoping that interest rates will drop so that your payments are better is bad financial planning. If you really can’t pay now, you’ll end up paying more while you wait and hope the interest rate drops. .”

For existing homeowners, decide to buy now and Refinancing later, or wait until mortgage rates drop, the mortgage rate on your existing home may drop. “In general, I recommend not selling or refinancing your home if the rate is higher than your existing mortgage, especially if you’re looking to buy a new home,” advises Michael Gifford, CEO and co-founder of Splitoro.

Check your mortgage refinance rate here to learn more.

Bottom line

If you’ve decided to take out a mortgage now, but are worried about locking yourself into a higher rate, consider getting a mortgage with a float-down option. This feature allows you to lock in your interest rate and allows you to take advantage of lower rates over a period of time.

Not sure whether to buy a home now and refinance later, or wait Mortgage rates drop? It can help to know there are other options to consider. One option is to make improvements to your home using funds from a Home Equity Loan or Home Equity Line of Credit (HELOC). Tapping into your home equity to upgrade your property can increase its value.