Wednesday, January 25, 2023 / by Brad Brethouwer
How adjustable-rate mortgages can help lower your interest rate.
Are you looking to buy a home in 2023? If you are, you’re probably aware that interest rates are a little higher than they used to be. What can you do to mitigate the impact of higher rates and find your dream home?
First, are rates truly as high as people say? According to a chart that was based on Freddie Mac's historical data, the average 30-year mortgage rate is 7.76%. A big reason for that is interest rates were around 18% in 1982 and 1983. However, if you ignore that outlier, the average is still around 6%.
However, if rates are stopping you from buying your dream home, that probably isn’t much comfort. That’s why I recommend looking into an adjustable-rate mortgage. With this option, your rate is lower for the first five to seven years, then it adjusts based on what the prime rate is at the time.
"The sooner you buy, the sooner you can take advantage of your equity."
This can be a great option in today’s environment, but if you're someone who has questionable credit, this isn’t the loan program for you. It created a lot of hassle and issues during the Great Recession, so only look into this option if it makes financial sense for you.
If you have good credit, then I would seriously consider this program. Rates for some adjustable-rate mortgages are around 5%. Plus, if the rate goes down any time in those first five years, you can refinance. Housing prices are only going up long-term, so the sooner you buy, the sooner you can take advantage of your equity.
If you have questions about this topic or anything else, please call or email me. I am always willing to help!