Should You Spend More on a Home when Interest Rates are Falling?
The answer might not surprise you: it all depends on whether your budget can stretch beyond making a larger down payment. While falling interest rates allow for added purchasing power, it remains critical that you understand the true cost of any home—that’s especially the case if the property you’re now eying is a greater financial undertaking than you previously budgeted for.
Every property comes with its own unique costs
You likely already know that high-priced homes can require extensive (and thus increasingly expensive) maintenance routines. You’re probably ready to budget for higher property taxes as well. So, what aren’t you taking into account?
Perhaps the most important adjustment to consider is how general expenses might change when you own a bigger place. For one, energy usage typically goes up when you need to heat and cool more rooms. Extra space also involves buying additional furniture and decor—if your aesthetics are already on the pricier side, this alone might upset your bank account.
Don’t let your loan terms deceive you
Keeping an eye on your lender’s long term expectations is also important when stretching a budget. If you’re considering an adjustable-rate mortgage, for example, keep in mind that initial low-interest rates could increase in the future. Ask your lender as many questions as you can, with a focus on the future and its impact on your financial responsibilities.
One alternative approach to taking advantage of current low-interest rates is to opt for a shorter-term loan on a less costly home. The money you save on a 15-year loan vs. a 30-year term could end up being substantial enough to position you for a bigger move the next time you want to hit the market.
Responsibly capitalizing on low-interest rates still requires sticking within your financial means. The last thing you want is to come across unexpected and unmanageable expenses. We at Open Mortgage are always available, willing and able to help with your home financing needs and concerns. Visit OpenMortgage.com to learn how to speak with an originator today.