Rates could increase in the future
Mortgage interest rates are influenced by a range of economic factors, including inflation, Federal Reserve policies and overall market conditions. Historically, rates have shown a tendency to fluctuate, and while they've already increased significantly this year, there's a chance they could climb even higher in the future.
By locking in a mortgage rate now, you can shield yourself from the potential rate hikes down the road. This can provide you with peace of mind, knowing that even if rates rise, your mortgage interest rate will remain unchanged. And, given the impact that higher rates have on your monthly mortgage payments, this proactive step can save you a substantial amount of money over the life of your loan.
Refinancing is always an option if rates drop
One of the advantages of locking in a mortgage rate now is that, should rates drop significantly in the future, you still have the option to refinance your mortgage loan. When you refinance, you replace your existing mortgage with a new one at a lower interest rate, leading to reduced monthly payments and long-term interest savings.
By locking in a rate today, you're protecting yourself against potential rate increases while keeping the door open for refinancing if rates become more favorable. And, you're also not passing up on homes that fit what you want or need in hopes that rates will drop. That's a big benefit in today's market, considering that housing inventory is still lacking in most markets.
If rates drop, competition will be steep
The housing market might be relatively competitive right now, but it could become even more so in the future if rates drop. There are already ongoing issues with limited housing inventory, and as we've seen in recent years, lower rates typically lead to more buyers competing over the available homes. That, in turn, can lead to higher home prices — and lost opportunities to purchase your dream home.
Given these what-ifs, it makes sense to lock in a mortgage rate right now, especially if the perfect home has come along. You don't have to stay tied to that rate forever, but if you wait, you could miss out on a home that fits your specific requirements. And who knows when another one will become available.
The Bottom Line
Given the unpredictable nature of the housing market, and the ongoing inventory shortage, locking in a rate can provide you with the opportunity to buy a home when the right one comes along — and then adjust your loan as necessary in the future.
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