There are many well-known sayings that hold true, like “don’t judge a book by its cover,” “the early bird gets the worm” and “better safe than sorry.” But is there any truth to the real estate adage that homebuyers should “marry the house, date the rate?”
Let’s look at the thinking behind this homebuying strategy and whether now is the time to put it into action.
What does ‘marry the house, date the rate’ mean?
The “marry the house, date the rate” adage reinforces the fact that you can change your mortgage rate while remaining in the same house.
There is a common misconception that you should always put off purchasing a home when rates are high. This approach may seem financially sound in the short-term, but the delay could cause you to miss out on the home you want to marry.
Instead of waiting an undeterminable amount of time for interest rates to drop, you may be better off acting now. Interest rates are always fluctuating. Your initial rate may be higher than you like, but by “dating” your rate, you can break up with it as soon as a better option presents itself.
“It’s a cycle, and when [interest rates] come back down, borrowers will have the opportunity to refinance to a lower rate,” said Steven Vieira, director of mortgage sales and operations at AAA Northeast.
Is now the right time to ‘marry the house, date the rate?‘
Those with a mortgage should always be dating the rate. Even if the original loan comes with a low interest rate, it is wise to consider refinancing if rates drop even further.
That said, the “marry the house, date the rate” strategy was devised for high-rate times like these. The opportunity to refinance when rates drop provides a built-in safety net that ensures consumers will not be locked into an exorbitant interest rate for the length of the mortgage.
Additionally, despite reaching historic highs, interest rates may continue to increase. This would make waiting to purchase a house a costly delay. Taking out a mortgage today would eliminate that possibility.
“Marry the house, date the rate” can be particularly appealing to renters who have put off homebuying during these turbulent times. Remember, mortgages are essentially savings accounts. Borrowers deposit money each month and when the loan is paid off, they become the owner of a valuable asset – a house. Renters, on the other hand, will never get their money back. By adopting the “marry the house, date the rate” strategy, renters can begin building equity immediately when they might have otherwise been reluctant to take out a mortgage.
Is now the right time to buy a house?
It is not just interest rates that have people concerned. Skyrocketing house prices are also scaring off many potential buyers. At the close of 2022, the average sale price of houses in the United States was more than $535,000, according to the St. Louis Fed. That is a roughly $130,000 increase from just two years prior, marking the largest such jump in the history of the American housing market.
But there are two important points to remember about current housing prices: They are not likely to drop significantly any time soon, and they could work to your advantage when trying to get into your dream house.
Let us look at the first point. Many potential homebuyers are operating under the premise that a housing bubble is about to pop, which will cause prices to decline. But Vieira cautions that consumers should not hold their breath waiting for this to happen. “It goes back to basic supply and demand,” he said. “The housing stock is the lowest it has been in years. This fact alone will keep prices stable, and we may see increases.”
Secondly, the current market could present opportunities for those looking to purchase a house. High prices and interest rates have discouraged many potential homeowners, leaving them sitting on the sidelines. In turn, those looking to sell their home now have a smaller pool of buyers to choose from. This does more than limit the competition. With fewer options, sellers are more likely to be willing to negotiate price and terms. When all is said and done, buyers acting now may end up finding a better deal today than they would have in a less-turbulent housing market.
Are you ready to “marry the house, date the rate?” Contact AAA Financial Services to start your mortgage application today.