Low Mortgage Rates: Time to Buy, or Not?

[Apr 23, 2009.]

 

Lower mortgage rates are increasing affordable mortgage financing, and long-time renters may be thinking of transitioning from renting to homeownership. When is the right time to buy a home? Here are some reasons to consider buying, and some reasons that may indicate that it's best to wait awhile.

Financial Readiness for Getting a Mortgage and Buying a Home

 For anyone financially prepared to buy and maintain a home, here are some compelling reasons for buying:

• Rates are low: Lower mortgage rates are providing opportunities for those who could not afford to buy at higher rates. Anyone priced out of the market a few years ago may now find buying a home affordable.


• Possible financial advantages: These may include tax deductible mortgage interest and building home equity. Of course, individual circumstances determine how or if these benefits apply, so it's a good idea to discuss a potential home purchase with a financial adviser


• Home Equity: Although there are no guarantees, homes typically increase in value over time. The difference between a home's current value and the amounts of mortgage debt against it is called home equity. Buying a home can help build wealth and accumulate a source of funds for home improvements, starting a business or consolidating high cost debt at lower rates.


• Lifestyle benefits: For renters who's been inconvenienced by noise, rules, intrusive landlords, or feared for their safety in rental accommodations, buying a home can provide peace of mind and more opportunity for enjoying life at home.  Unless governed by  restrictive homeowner associations or zoning restrictions, most homeowners are free to keep pets, entertain guests, and decorate according to personal preference.


• Wanting a place to call "Home": The most important reason for buying a home is the desire to do so. No matter what real estate agents, mortgage brokers, friends, co-workers, or family members may say, the only time to buy a home is when one is financially and emotionally ready to take on the responsibilities of homeownership.

Don't Rush: From Bad to Worse

Here are a few reasons not to buy a home. Anyone who hasn't decided that they want to buy should not be influenced by the following arguments alone:

• Rates are low: For anyone thinking about buying a home, low interest rates can be a decisive factor, but for those who haven't considered buying a home, rates alone are not reason enough.


• Pressure from others: "It's the American dream!" "It's a sign of responsibility." "Isn't it about time you started thinking about buying your own place?" Such pressure may influence some to buy a home they're not ready to own. 


• Employment and Financial Concerns: It's important to consider any concerns about financial security and the ability to repay mortgage debt.


• Future plans: Buying a home may not be feasible for those anticipating relocation within the next couple of years. Staying in a home long enough to break even on closing costs and lender fees is an important consideration when buying a home.

Wanting to buy a home and being financially prepared to buy are the best indicators of readiness to buy.

 

About Author:

Karen Lawson is a freelance writer with extensive experience in mortgage banking and home loan loss mitigation programs. She holds BA and MA degrees in English from the University of Nevada, Reno.