The current housing market is in an interesting position. Mortgage interest rates are high, but home prices are starting to cool off. It raises the question of whether it’s a good time to buy. The advantage of buying now is that home prices, while expected to continue to drop, are the lowest they’ve been in quite a while. That means you may be able to get a home at a decent price without heavy competition, and start to build equity. The disadvantage is that you’re locking in a high interest rate.
That’s where refinancing comes in. While the price of a house can’t be renegotiated once the sale is finalized, your interest rate can. This is why buying with a high interest rate can be appealing if other conditions are favorable. But this is risky, because you never truly know how long rates will remain high. It could take a long time for interest rates to drop, and it’s even possible that by that time, home prices will also be lower. In this situation, not only did you essentially overpay for your home, but you’ve been stuck with a high interest rate for longer than anticipated. It’s also worth noting that if the current interest rates scare you enough to already be thinking of refinancing in the future before you’ve even bought the home, there’s a good chance it’s because you can’t truly comfortably afford the payments for any considerable length of time.
So should you consider buying now and refinancing later? What it ultimately comes down to is that it’s a risky time to buy, and it’s not entirely clear whether it’s worth the risk even if it pays off. What is clear is that if you can’t afford to task risks, you definitely shouldn’t. But if you can comfortably wait as long as you need to, it simply boils down to real estate as a long-term investment. In that case, it’s actually one of the lower risk types of investments, but that doesn’t negate the fact that the risk is higher than usual in the current climate. The actual answer will depend on the individual and on the future, but likely answers are either “no” or “probably not.” What are some alternatives, then? Waiting for mortgage rates to drop, or even just waiting for home prices to drop more, since that can’t be renegotiated. In the meantime, you can also consider upgrading your current home to increase its sale value for when you do buy.