The Federal Reserve Board is meeting this month to discuss a small interest rate cut, which seems likely, given that the Board chair, Jerome Powell, said in an August meeting, “The time has come for policy to adjust.”
Rate drops have a direct impact on mortgage interest rates, as well, which are likely to drop if overall interest rates do. While these cuts may not be huge, they are likely to result in the lowest rates for years to come.
How can home buyers take advantage of these cuts? Real estate experts explain some considerations. Also, if you’re planning to buy a home soon, make sure you’re aware of the costs beyond your mortgage.
Opportunities To Refinance
One of the first things people who already own a home might do if rates drop is refinance, according to Andy Heller, real estate investor and owner of Regular Riches.
“Just because you bought property at a higher interest rate doesn’t mean you have to stick with that loan. So if rates fall, as long as you’re able to maintain your employment, you can always refinance that loan and bring down your payment dramatically,” he said.
You Get More Value the Longer You Hold On
While a rate drop might have you thinking about selling your primary residence and buying a new one, Heller suggested you might want to consider holding on to your property, if you’re not in a hurry to move anywhere, because your property will likely continue to gain value. This is especially true if the country heads into an economic downturn or recession.
He pointed out that people who bought homes in April 2008, just before the Great Recession, may have lost a significant amount of value immediately after, but if they held onto that home for another ten years, they more than likely made their money back.
A Primary Residence Is Almost Always Worth It
Heller, who has been investing in real estate for decades, said he wouldn’t hesitate to buy a primary residence today, even if he felt he was slightly overpaying. The key factors are knowing you’re going to stay in a home for a long time and having confidence that your job is stable.
Keep Emotions Out of It
It’s important to invest in property with a logical, not emotional, approach, Heller warned. “I think one of the biggest challenges that people have when they buy real estate is they’re not weighing the purchase properly. They’re not looking through the right glasses. They get emotionally involved in a decision. You’ve got to buy based on the factors on paper and try not to overpay.”