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In late 2020 and early 2021, mortgage rates repeatedly hit record levels. Average rates on 30-year loans fell well below 3%, while rates on 15-year loans hovered just above 2%.
Prices have increased considerably since then. But, if you’re put off by the idea that you’ve missed out on your chance to get the most affordable mortgage, you shouldn’t necessarily let that put you off buying a home.
In fact, there are many good reasons why buying a property could still be a great investment. Here are two.
1. Mortgages are still extremely affordable
Although rates are up from where they were at the start of the year, they are still low by historical standards. In fact, mortgage rates have traditionally been well above 4% on 30 year fixed rate loans. This means that you are still getting a good deal for what people have paid to buy a home in the past.
Even when rates were higher, mortgages were still one of the cheapest types of loans available, especially considering that you can claim a tax deduction for the interest on your home loan if you itemize your taxes. . Borrowing at such a low rate for an asset that is expected to increase in value over time is likely to improve your financial situation.
2. Owners usually end up with more wealth
U.S. Census data shows one of the main reasons that buying a home is a good financial choice for most people, even if they can’t afford extremely low mortgage rates. According to the census, the median net worth of homeowners is 80 times the median net worth of renters.
Part of the reason is that the wealthiest people in the first place are better placed to buy a home than those who face factors that make them find it difficult to own a home (such as low income). But, when you own a home, the home helps you increase your equity in most situations.
Each month, when you pay off your mortgage, you gain more equity in your home. Over time, you end up owning a valuable asset that is worth hundreds of thousands of dollars, if not millions of dollars. This is not the case with tenants when they pay rent.
Homes also tend to increase in value over the long term, so you gain more equity as your property increases in value. If you can make tens of thousands of dollars or hundreds of thousands of dollars in profit on the property you live in, that will naturally make you better off.
Of course, you still need to make sure that you are in good financial shape to buy a home and that you have an emergency fund to reduce your risk of foreclosure. And you will need to make sure you are paying a reasonable price for your property. But, if you can do these things, then you shouldn’t worry that mortgage rates are higher than they were earlier this year, because your property purchase is still likely to leave you better off. the end.
A historic opportunity to potentially save thousands on your mortgage
There is a good chance that interest rates will not stay at multi-decade lows any longer. That’s why it’s crucial to act today, whether you want to refinance and lower your mortgage payments or are ready to pull the trigger to buy a new home.
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