Mortgage Rates Too High?

Just like many during the early 1980s, there were many who purchased a home when mortgage rates were 15-18%. Others decided those rates were too high and waited, and waited for rates to fall.

Group 1 purchased a home when mortgage rates were high but the price of homes was low. For example, they purchased a home for $55,000.00, and today that home may be valued at $350,000 – $400,000. When mortgage rates significantly dropped, homeowners had the opportunity to refinance their existing mortgages at a lower rate. By doing so, they can reduce their monthly payments, potentially saving a substantial amount of money over the life of the loan.

Group 2 homebuyers waited for mortgage rates to decrease, allowing them to secure a lower interest rate on their loan. However, when they were ready to purchase a home, they found that the housing market had become highly competitive, driving up property prices. As a result, they needed to submit an offer significantly higher than the home’s listed price to have a chance at securing the property.

Which group is better off?

Group 2:

• No Equity Building:  Renters do not accumulate ownership of the property.
• Tax Advantages: Renters do not have access to these deductions.
• Limited Control: Renters have limited control over the property. They cannot make significant modifications or improvements without the landlord’s approval.
• Stability vs. Flexibility: Renting provides flexibility, allowing individuals or families to move relatively easily. appreciation.
• Wealth Accumulation: Renters miss out on this potential wealth-building opportunity.

Group 1:

• Equity Building: Homeowners build equity as they pay down their mortgage. Equity can be a valuable asset and can be used for various purposes, such as funding education, starting a business, or supplementing retirement income.
• Tax Advantages: Homeownership often comes with tax benefits, such as deductions for mortgage interest and property taxes.
• Control: Homeowners, on the other hand, have the freedom to personalize their homes according to their preferences, such as painting those walls a color of their choice.
• Stability: Homeownership offers stability and a sense of belonging to a community.
• Wealth Accumulation: Homeownership can contribute to long-term wealth accumulation. Properties often appreciate in value over time, allowing homeowners to build wealth through appreciation.