From Kiplinger · · 2m
Mortgage Rates Rise: Homeowners Action Guide
Higher mortgage rates offer homeowners strategies to refinance, downsize, or negotiate better deals without delay.
In brief
Higher mortgage rates offer homeowners strategies to refinance, downsize, or negotiate better deals without delay. Homeowners with equity can refinance, downsize, or negotiate home purchases despite rising mortgage rates by evaluating their financial situation. Originally reported by Kiplinger.
Mortgage Rates Rise
Mortgage rates have increased, with the average 30-year fixed rate reaching 7.28% and the 15-year rate at 6.60%.
Applications Drop
Mortgage applications fell 6% overall and purchase applications dropped 4% as rates moved higher.
Refinancing Options
Refinancing can still be viable for homeowners with equity, considering current interest rates, loan balance, closing costs, and expected home tenure.
Break-Even Point
Refinancing costs $6,000 could be recouped in 24 months if monthly savings are $250, calculated by dividing costs by expected savings.
15-Year vs 30-Year Mortgage
A 15-year mortgage has a lower interest rate but higher monthly payments, while a 30-year mortgage offers lower payments but more interest over time.
Mortgage Comparison
For a $400,000 mortgage, the 30-year fixed rate of 7.28% results in $2,737 monthly payments and $585,266 total interest, versus $3,506 for the 15-year at 6.60%.
Downsizing Trade-Offs
Downsizing may reduce home costs but higher mortgage rates can offset savings, requiring careful cash flow analysis for retirement.
Downsizing Example
A homeowner with $243,000 mortgage balance at 3% could save $232 monthly by downsizing to a $320,000 home at 7.28%.
Negotiating Power
Fewer buyers may increase negotiating power for homebuyers, with homes spending 61 days on market nationally in September.
Sellers' Concessions
Sellers offered concessions in 44.7% of U.S. home sales in August, up from 42.6% a year earlier, including repairs and closing cost reductions.
What to Watch Next
Mortgage rates are influenced by Treasury yields, inflation expectations, and bond market conditions, not just Federal Reserve decisions.
Homeowners' Action
Homeowners should evaluate their financial situation, retirement income, and flexibility before deciding on refinancing, downsizing, or buying.
Key Considerations
Homeowners with significant equity don't need to delay plans until mortgage rates drop; focus on whether numbers work for their finances and retirement.
Next Steps
Homeowners should calculate affordability, refinance break-even points, and use tools to connect with financial professionals for personalized advice.
The main idea
Homeowners with equity can refinance, downsize, or negotiate home purchases despite rising mortgage rates by evaluating their financial situation.
