It's no secret that the COVID-19 pandemic has reshaped countless industries. In particular, the real estate space is one of the most notable.
Interest rates are currently historically low, which has led to many people purchasing a home for the first time. But, not everyone has made up their mind yet (or knows why they should take advantage of this situation).
Not sure where to start? Don't worry, we’ve got you covered.
Let's take a look at everything you need to know about how the Utah housing market's current interest rates can benefit you.
You Can Purchase a Home You Otherwise Wouldn't Be Able to
As you may expect, one of the largest benefits of purchasing a home that has a low interest rate is being able to close a deal on a house that you normally wouldn't be able to.
For example, homes with higher interest rates require a larger down payment and a larger monthly payment. For many people, the home that they would like to live in remains out of reach due to these factors.
With historically-low interest rates the market is currently experiencing (especially in places like St. George), it's now possible for families to consider their dream homes as a feasible option.
This doesn't apply only to higher quality homes, though. Lower interest rates also give buyers more leverage when looking at larger properties.
For example, it's not unlikely for a normally-expensive home on a large plot of land to become reasonably affordable.
Renting Out a Home Becomes Easier to Accomplish
Not everyone intends to live in the home that they purchase. In fact, it's relatively common for people to buy a home solely for the purpose of generating passive income by renting it out.
When all of the factors properly align, the rent payments their tenants make will not only cover the owner's mortgage payment but also give them a bit of extra income each month.
The problem is, though, that it can be difficult to strike a balance between what you charge for rent and how much you owe on your mortgage each month. For example, higher-quality, larger homes are easier to use as justification for higher rent payments.
The same can be said about homes that are located near hotspots, such as a downtown location.
But, these homes also come with a higher mortgage payment due to their larger overall price. With low interest rates, though, you won't have any problem finding someone to pay your desired rent amount while simultaneously being able to cover your mortgage with this income.
So, those who intend to pursue this endeavor should highly consider how the market's current interest rates could benefit them.
You Can Watch Your Property Value Rise
In most scenarios, the value of your property will grow over time. This is simply the result of supply and demand, as there is only so much land that can be developed into residential space.
When new homes aren't able to be built within the immediate area, your property becomes more valuable on the market. When you're able to purchase a home at a low interest-rate, though, you'll see a greater increase in property value over time.
This is due to the fact that interest rates will rise back to their previous levels as time goes on, making property in that area inherently worth more.
To elaborate, COVID's drastic impact on the economy has caused interest rates (and real estate prices) to fall. As the economy recovers, both of these values will increase. Over time, the supply of available residential property will cause values to rise even higher.
As you can tell, those who are looking to hold onto their property for an extended period of time can benefit highly from purchasing under the market's current conditions.
What About People Who Already Own Homes?
Fortunately, those who already own homes are still able to take advantage of the market's rock-bottom interest rates. This is particularly useful for those who have above-average rates on their mortgages, as they are likely to find themselves saving tens of thousands of dollars overall.
Even a marginal decrease in your interest rate could still cause you to save a significant amount of money. It's important to know, though, that refinancing your home does more than simply cut down your monthly mortgage payment.
You also end up paying less money in interest, which allows you to build equity in your home at a faster rate. This comes with numerous benefits, such as being able to eliminate the need for private mortgage insurance more quickly (which is possible at 20% equity).
If you wish to still pay the same amount each month, you'll be able to shorten the overall length of your loan term after refinancing your mortgage.
For example, let's assume you pay $1500 per month for your current mortgage payment on a 20-year mortgage. Although refinancing may cut this monthly payment down to $1200, you can still pay $1500 per month and reduce the length of your repayment term.
From here, you'll be able to attain full ownership of your Southern Utah home at a much faster pace and relieve yourself of the financial burden that mortgage payments impose.
Deciding to Buy a Home Based on Current Interest Rates Can Seem Difficult
But it doesn't have to be.
With the above information about current interest rates in mind, you'll be well on your way toward making the decision that benefits you the most.
Want to learn more about how we can help? Feel free to get in touch with us today to see what we can do.
Posted by David Ellis on
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