Wondering if you should buy a home now with slightly higher interest rates, or wait until interest rates, or the prices of homes in San Antonio, Texas go down? All great questions, especially if you find yourself in a situation in which you need to sell your home and relocate. While there are many factors to consider, it is important to remember that a good, knowledgeable lender can help you with options that you might not have thought of. Two examples:
- Refinancing is always possible down the road, especially if you’re worried about home prices increasing in the area you’re moving to. Refinancing your home involves obtaining a new loan that will replace your previous one with new, (hopefully better), terms.
- Mortgage recasting is another way to reduce your monthly mortgage payments by applying a lump sum towards the principal balance of your new home loan. This might be a good option for you if you qualify to purchase a home in the area you’re relocating to, without waiting for your current home to sell. Once your old home sells, and you pay your lender a large, lump sum towards the loan on your new home, your loan is “recast” or re-amortized and recalculated based on your new, lower balance. The term and interest rate of your new loan stay the same, but because you will have greatly reduced your principal, your new monthly payment amount will be lower. This is different than refinancing a home, as when you refinance, you are taking out an entirely new loan to replace your old loan. Recasting is also a great option for those who may receive a large bonus, inheritance, or have a non-traditional stream of income. It’s also usually much simpler to recast instead of refinance as no credit checks or appraisals are involved. Additionally, you avoid closing costs. (Some lenders may charge a small fee for recasting, so ask your lender.) NOTE: Not all loans are eligible for recasting, nor do all lenders offer this service. FHA and VA loans aren’t eligible for recasting. Always check with your lender to see what the criteria are for qualifying.
What effect is the Russian-Ukrainian war having on interest rates and real estate?
Rates for home loans fell this week as the Russian invasion of Ukraine added to the pressure on U.S. financial markets, offering a brief window for mortgage applicants to get a lower interest rate.
Mortgage Rates Drop As Ukraine Conflict Rattles Markets–Where Experts Say Rates Will Go Next (Forbes)
When times are uncertain, investors typically flock to safer assets like mortgage backed securities and/or bonds, which can lead to declining mortgage rates. While this may lead to a temporary reduction in interest rates, it’s difficult to predict how long this will last. Reaching out to a lending professional or financial advisor can help you make an intelligent and informed choice.
Is the housing “bubble” going to burst?
This is definitely a question I hear often. While I’m no expert, there are some points to keep in mind regarding our current situation that are vastly different than conditions that led to the housing and stock market crash in 2008.
- Almost all experts agree that explosive growth in the subprime mortgage market, (starting in 1999), was a significant factor.
- Home loans by Freddie Mac and Fannie Mae were made available to borrowers who had low credit scores and a high probability of defaulting on loans. (These borrowers were known as “subprime” borrowers.)
- Subprime borrowers were allowed to take out ARM (adjustable rate mortgages), which start out with very low monthly payments and become much larger after a few years.
- These subprime loans were sold to commercial investors as mortgage backed securities.
- As a large number of borrowers started to default on subprime loans by the Fall of 2008, the result was a collapse of the stock market.
- Homeowners increasingly found themselves upside-down; owing more on their home than it was worth and subsequently, lost their homes to foreclosure.
A domino effect ensued, leading to the largest bankruptcy filing in U.S. history at the time: Lehman Brothers, (a major investment firm), who couldn’t sustain their own investments in the subprime mortgage market. Further panic trickled down to the money market fund industry in the form of massive redemption requests. Government bailouts followed and financial turmoil escalated. All of this began with a desire to help more people achieve the American Dream.
Our current situation is very different! At this time, especially in San Antonio, Texas, we have a strong demand for homes coupled with low availability. As mentioned above, when times are uncertain, many buyers and sellers may be motivated to move their money into real estate for more stability. Instead of causing a collapse in the housing market, this leads to continued problems with supply and affordability.
San Antonio, Texas continues to experience record numbers of visitors and new residents, which contribute to a healthy, (okay, insane), demand for real estate.
While inflation, interest rates and stock market swings all continue to play a part in our market, should you decide you’re ready to sell your house, or you’re looking for your next home, I would love to help!
Disclaimer: This article is not meant as financial advice. Always consult with a trusted financial advisor or lending professional. All rates published were current as of date referenced.