I'm Paying a Higher Mortgage Rate Than I Wanted. Here's Why I Got the Loan Anyway

When I bought a house recently, I had to take out a loan in order to afford it — just like most people do. Unfortunately, my mortgage has a higher rate than I would have preferred. That’s because, sadly, rates just happened to be pretty high at the time when I needed to close on the loan.

Despite the fact my rate is much higher than it would be in an ideal world, I went ahead and got the loan anyway. Here’s why.

1. Buying a home made the most financial sense for me

The biggest reason I decided to get a loan when rates were high is because it made financial sense for me to purchase a home.

I had sold my old house and I needed a place to live in the state to maintain my residency there. I could have rented, but it would have been very difficult and expensive to find a rental property that accommodated my family, including my elderly dog and two kids. And I’d have been spending a lot of money on rent without building equity in my home. Plus, since I ultimately would have wanted to buy, I’d have to pay for movers multiple times, which gets expensive.

If you’re in a good place financially to buy and it’s cheaper or comparably priced to purchase rather than rent, you’re almost always better off buying, even if mortgage rates are higher than you’d like. Homeowners have 40 times the net worth of renters, in part because their mortgage payments are a form of forced savings, as each payment helps them get closer to acquiring a valuable asset.

2. I could afford the payments, even at the higher rate

Another big reason I moved forward was because doing so wouldn’t be a financial burden. I was still able to keep housing costs below 30% of my income, even with a loan at a higher-than-ideal mortgage rate.

More: Check out our picks for the best mortgage lenders

If you spend more than 30% of your take-home pay on housing, you could be left house poor and unable to do important things like invest for the future. If you’d end up in that situation, you’re better off not buying.

3. I don’t know when rates will go down to my desired level

I do not know when mortgage rates are going to fall, or if they’ll decline to my preferred level any time soon. No one can predict what will happen with rates, although there are experts guessing out there. It didn’t make sense to me to put my life on hold for months or even years in hopes of an uncertain future outcome.

The reality is, you can’t always time your purchase to when rates are as low as they will be for years. And trying to do so could mean putting off building equity in your home for far longer than you’d like. If your rate is affordable for you, there’s no reason to wait and hope for something better in the future that may never happen.

4. I can refinance when rates fall

Finally, I know that if I get lucky and rates do fall, I can refinance my mortgage. And that’s one of the biggest perks of mortgages for any home buyer. You get to lock in at the rate right now and guarantee your payments won’t go up. But if rates fall, you can refinance at any time and lower yours, so it’s a one-way risk. The mortgage lender can’t just charge you more even if rates skyrocket, but you can walk away at any time and get a better loan if things turn in your favor.

Be aware, however, that there are closing costs associated with refinancing, just as there are with getting a new mortgage.

If you’re putting off buying a home right now because you aren’t happy with mortgage rates, take the time to consider whether that’s really the right choice. You could miss out on years of property appreciation and equity building while waiting for the perfect rate that might never come — or could accept the good enough rate that’s affordable to you and just refinance later if you get the chance. Which of those choices seems like your best bet?

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