Many potential home buyers are struggling in today’s real estate market for a number of reasons. Not only is inventory extremely limited, making it difficult to find a suitable home, but property values have skyrocketed over the past year. This forces many buyers to get prices outside of the areas that they would normally be able to afford.
The reason house prices are so high boils down to increased demand. Many buyers are looking to purchase a home this year to take advantage of the current mortgage rateswhich are historically very low.
But here’s some good news for home buyers who may be considering postponing their home search plans. Freddie Mac now predicts that the average mortgage rate on a 30-year fixed loan will be 3.7% in 2022. And while this is slightly higher than the current average rate, it is still a very competitive rate to fix.
6 simple tips to secure a 1.75% mortgage rate
Safe access to The Ascent’s free guide, which explains how to get the lowest mortgage rate when buying a new home or refinancing. The rates are still at their lowest level in several decades, so take action today to make sure you don’t miss the chance.
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Should you postpone your home buying plans until 2022?
Right now, there is not enough affordable housing to meet consumer demand, which is driving up prices. Many of the listed houses are ending today bidding warwhere two or more buyers go face to face trying to offer the best deal. And that leaves shoppers on a budget in a quandary.
However, a good reason to move forward with your home search today is to take advantage of ultra-low mortgage rates. But if rates remain competitive next year, then 2022 could be the best time to shop. At this point, we will see that there are a lot more products on the real estate market, and once that happens, prices may start dropping.
At the time of this writing, the average 30-year mortgage rate was 3.105%, which is in line with what Freddie Mac predicts as the average rate for the entire 2021. If you took out a $ 300,000 30-year mortgage at 3.105%. , your monthly payment will be $ 1,282 in principal and interest on the loan. (Note that your $ 1,282 does not include external costs such as property taxes and homeowner’s insurance.)
Now, suppose you had to wait until next year to buy a house, when the interest rate could be 3.7% on the same loan amount with the same term. In this case, your monthly principal and interest payment will be $ 1,380. That’s more money per month. But if home prices drop dramatically next year, you could possibly get a lot more home for that $ 300,000 mortgage. Or you may get away with borrowing less.
And if house prices drop enough that you can mortgage up to $ 250,000 at 3.7% over 30 years your monthly principal and interest payments will be $ 1,150. This means that you will save money even with a higher mortgage interest rate.
However, just because Freddie Mac expects an average 30-year loan next year to be 3.7%, that doesn’t mean it’s guaranteed. But what is it does means that if you’re getting discouraged about finding a home, it might be time to pause and try again in 2022. Chances are, you will still have many opportunities to save on your mortgage, and you can even win a much better deal on your home too.