If you don’t like the rate, maybe you should lower it. 

If you’re thinking mortgage interest rate hikes are looking like the last SpaceX launch, you wouldn’t be far off the mark.

In what started as a move by the Fed to curb inflation, several interest rate hikes have already been made and it doesn’t look like they’re going to end anytime soon. While that may seem like bad news for some buyers, others are getting creative and thinking outside the box. 

First things first. It is what it is. We’re reminded by Tony Moore, one of our mortgage industry advisors to “Marry the house, not the mortgage.” To keep things in perspective, don’t let today’s rate environment sideline you into giving up on the home that fulfills your needs and dreams. 

Mortgages can be refinanced to more favorable terms down the line. What is to be said for the missed opportunity to buy your dream home? Let’s explore ways to keep the ball in play.

If history repeats itself, rates will eventually retreat back into their ‘normal’ range. Maybe not back to the historic and artificial lows we experienced over the last decade. But normal nonetheless. Every mortgage we’ve ever had was between 4.5 and 7 percent. 

During this unprecedented mortgage bonanza, many so-called cash buyers took out a mortgage instead and put their money in the investment market. 

While rates were so low, we all probably forgot about all those financing hacks that took a little bit of the sting out of runaway interest rates. As of today, that’s all changed. Now you’ll find products like Adjustable Rate Mortgages (ARMs) and Interest Rate Buy-Downs back in full swing.

ARMs are fairly common and pretty simple. For an up-front premium, the buyer enjoys a low introductory rate, with increases tied to an index over the initial years of the loan. The theory is that the buyer is able to afford more home at the lower rate and future income growth will offset the pre-determined rate increases. 

Interest Rate Buy-Downs, on the other hand, work much like the ARM, except there is no out-of-pocket cost to the buyer. The buyer starts at a more comfortable rate, with programmed increases tied to the terms of the product. 

As we close down 2022 following 24 months of what is indisputably the most active real estate market in history, the market is clearly slowing down to a more normal pace. Let’s recap:

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During the frenzy, between 40 and 50% of home sales were cash. But suddenly, at the flip of a switch, things changed. Half or more of the buyers got sidelined due to rate hikes. The rate hikes took a huge bite out of how much home they could buy. 

While a reduction in resale prices remains uncertain, future interest rate hikes are almost guaranteed. That makes the Interest Rate Buy-Down approach an attractive option for buyers seeking a mortgage, and sellers eager to sell. Now is the time to get off the sidelines and back in the game.

Interested? Drop us a call, text or email. We’ll walk you through your options and point you to lenders who can make it all happen.

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