- Karina Mejía seeks to expand her property portfolio, despite high interest rates.
- It’s a better time to buy now than last year, he said, because you can actually trade.
- Plus, owning a home will protect you from potential rent increases.
Karina Mejía seeks to expand her real estate portfolio of six properties.
“I really think it’s still a good time to buy, and I’m not saying that because I’m an agent,” the 25-year-old real estate investor and broker told Insider. She owns houses in Boston.where he lives, and Augusta, Georgia.
Despite high interest rates, the the average 30-year fixed rate is 6.37% as of November 11, 2022, compared to 3.3% last November, there are advantages to buying a property at this time.
“It’s a much better time to buy now than it was last year,” he said. “Now buyers have an opportunity to do the things that they should have been doing, like inspection contingencies and appraisal contingencies, and they have an opportunity to come to an agreement. Now really they can negotiate and get discounted housing.”
Whereas, when the market was at its highest, “you couldn’t get your offer accepted if you didn’t go much further than asking for and waiving inspections and appraisals.”
Plus, owning a home will protect you from potential rent increases.
“You’re not going to have your mortgage rate fluctuating like a rent payment does every year,” Mejía explained. “Some leases add $200 each year. That’s pretty drastic. There are tax benefits to owning a home, like canceling your mortgage insurance, and you’ll have the benefits of building equity and paying your own self mortgage, rather than someone else’s.”
That said, it is more expensive to own a home (when rates are higher, monthly mortgage payments are higher) and you shouldn’t buy unless you can afford it.
“I think it would be a disservice to say that now is a good time to buy for everybody“Mejía said. “You don’t want to enter into a monthly payment that doesn’t suit you. That’s especially important to consider in today’s economy, where people could lose their jobs.”
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As a prospective buyer, you also want to consider your time frame: Do you want to stay in your home for the next five to 10 years? Or do you think you will move in two or three years?
If you plan to buy and potentially sell three years from now or less, you probably want to wait to buy, Mejia said: “Values go up and down, up and down, up and down. If you’re going to sell within that time frame, the property might actually be worth less. You don’t want to put yourself in a position where you could lose money.”
It will be safer to shop if you plan to stay home for a while. Your home will have more time to appreciate in value, which will help offset the expensive transaction costs that come with buying, such as your agent’s commission and closing costs.
Potential homebuyers should also look for assistance programs in their area, he noted, “This is market specific, but what you tend to see when there are interest rate increases are more down payment assistance programs to help with affordability”.
For example, in its main market, Boston, Massachusetts, there is a program called MassDREAMS provide grants for down payment and closing costs to first-time homebuyers.
“It’s basically a grant of up to $50,000 for a first-time homebuyer to buy their first home,” Mejia explained. There are specific eligibility requirements: you must live in one of the 29 communities that have been disproportionately affected by the COVID-19 pandemic, and the amount you can receive depends on your income.
In general, “I wouldn’t be scared to buy. I think it’s a mental hurdle that people have to overcome right now,” Mejía said. “If you can still afford a mortgage in your current market and buy a house that you’d like, then it absolutely makes sense to buy it.”