The past year has been anything but predictable, yet amidst the uncertainties, there emerged a silver lining in the form of the housing market. The concurrent pandemic that prompted a complete shift to digital platforms didn't impede the robust housing market. Instead, record-low mortgage rates surfaced, empowering buyers to stretch their finances further than before. Not only have these low rates been a boon to first-time buyers, but current homeowners eyeing refinancing, property investments, or capitalizing on their home equity have also gained considerably. In the first half of 2020, refinances witnessed a whopping 200% surge, compared to the corresponding period in 2019. So, what does this signify for you? It implies that the opportunities to capitalize on your amplified purchasing and saving power remain ripe in 2023! Let's delve into this further.
As a first-time homebuyer looking to invest
We're presently navigating a seller's market where housing inventory falls short of the market's buyer demand. Here, sellers hold the advantage, with the potential to elevate listing prices, given the buyers' readiness to pay a premium to secure a property. Yet, with the prevailing low rates, first-time buyers can extend their budget further than before. The subsequent graph illustrates how even a marginal dip in interest rates amplifies your buying power*. The lower the interest rate, the more significant your long-term savings. However, remember that the lowest rate doesn't necessarily translate to the best deal. Trusting a reputable lender to offer precise information and propose a home loan tailored to your financial position and long-term objectives is essential.
As a current homeowner aiming for a better rate
As noted earlier, the current rates, the lowest in over half a century, make this an opportune time to purchase or refinance. Even recent homeowners could secure a more favorable rate. While the conventional wisdom suggests that refinancing becomes profitable if your rate reduces by at least 2%, some lenders propose that a saving of 1% is reason enough to contemplate refinancing your home. (We always recommend consulting a mortgage professional first.) You can find more insights on when to consider refinancing and your loan options here. Keep in mind, appraisal, closing costs, and origination fees can accumulate quickly during the refinancing process. Additionally, your lender might impose a prepayment penalty for settling your current mortgage early. It's advisable to discuss this with your lender or mortgage servicer for more clarity.
As a current homeowner considering upscaling or investing
For those contemplating leveraging their money further, now is an opportune moment! Whether your goal is to acquire a second home, an investment property, or simply to upgrade, 2023 could be your year. A refinance on your existing property could even provide the necessary funds for your subsequent purchase. Additionally, owning a second home or investment property comes with myriad benefits, such as:
- Providing a second home for a college-going child as an alternative to costly university accommodation
- Renting out the investment property for short or long-term stays, or even as a vacation rental
- Owning a vacation home
Remember: Even though they serve a similar purpose, second homes and investment properties have different financing parameters.
The Takeaway
At CrossCountry Mortgage, we prioritize empowering you to secure a financially stable future. Whether that entails acquiring your first home to build equity or purchasing an investment property for additional income, we're here to assist you in realizing your 2023 objectives.
Connect with a Mortgage Advisor today for a complimentary consultation!
*Rate indicated is for illustrative purposes only and does not mirror current rates. Principal and interest payments are approximated to the closest dollar amount.
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