Two important factors in motivating homebuyers to mobilize are a drop in housing prices and lower mortgage rates. Each one can be a sign for families and individuals looking to purchase a house to get started on the process and begin contacting real estate agents to get the mortgage process started. A shift in mortgage rates can also kick families and individuals thinking of selling their home into gear, as an increase in demand from the lower rates could mean their home will actually get seriously looked at from buyers and sell for a reasonable price.
But, which factor is more important when it comes to deciding when you should start looking to buy a home? We will discuss how each change can impact important your monthly outgoings and your deposit.
The Monthly Payment
Perhaps you started looking for a new home last year, but decided that your monthly payments with the interest rates ate the time would have been too high, and chose to wait for the rates to drop to make homes in your desired price range more affordable. A lower rate would lead to less money gone towards your monthly outgoings.
However, you should be careful with waiting for interest rates to drop. This is because the value of a home you were looking at before you decided to wait could rise significantly as the neighborhood it is in changes and becomes a more desirable location to live. This means that even with a lower rate in the future you could actually end up with a higher monthly payment after making your calculations because you have to take out a larger loan to be able to afford the now more expensive property.
The same problem can be encountered in the inverse, where the price of a property drops over time, but the interest rates of the mortgage market rise. Even as the value of the property drops, you may have to pay a higher interest rate on your loan, which could lead to a high monthly payment.
The Deposit
Even if you manage to get a lower interest rate for a home, you still might feel a significant financial impact if the value of the home rises. Paying a higher price means that your deposit will have to be larger to get the same kind of loan you wanted previously.
If your deposit amount remains the same after time has passed, you may have to get a larger loan than you would of in the past. This could mean that the lower interest rates you sought before are not what you will actually get with a larger loan. This is why the price of the home is so important, especially if you are unable to increase the amount of money you have available for a deposit.