Today’s Mortgage Rates Are a Bummer — but They Don’t Need to Be a Deal-Breaker

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Frustrated by sky-high mortgage rates? Read on to see why they don’t necessarily have to ruin your home-buying plans. 

There’s a reason so many home buyers have reached the point of utter frustration. Not only are home prices elevated today, but mortgage lenders are charging exorbitant rates for the privilege of borrowing for a home. And it’s not looking as if mortgages will get less expensive anytime soon.

The average 30-year mortgage rate today is 7.31%, according to Freddie Mac. For a $300,000 home with a 20% down payment, that means a monthly payment of $1,647 for principal and interest — not a small amount.

But while you may not want to pay upward of 7% on a mortgage today, you also don’t necessarily have to write off homeownership just because rates are elevated. If you can afford a home today in spite of the rate you’re looking at on a mortgage, then it could pay to move forward with a home purchase.

There’s a benefit to being a homeowner

Let’s get one thing out of the way — if you can’t afford to purchase a home today or simply don’t want to, there’s nothing wrong with renting. You can do quite well for yourself financially even if you’re writing a landlord a check every month.

But there are unquestionable benefits to owning a home you should know about. First, you get to call the shots and you don’t have to listen to a landlord’s rules. This means that if you want to paint your walls cobalt blue or adopt three dogs weighing 120 pounds each, that’s your right.

Also, there are tax benefits to having a mortgage, like getting to deduct the interest you pay on that loan (which, these days, is apt to be a lot since rates are up) if you itemize deductions. And there’s also the perk of getting to build equity in a place of your own.

That’s why it could pay to move forward with a home purchase today, despite getting stuck with a higher mortgage rate. If you can afford your monthly payments, you’ll enjoy the aforementioned benefits. And you also may not get stuck with a higher mortgage rate forever.

Mortgage rates tend to fluctuate over time. So there will likely be a point when rates come down. Once that happens, you can look to refinance.

Just make sure to crunch the numbers before you buy

The idea of paying 7.31% on a mortgage (or somewhere in that vicinity) when borrowers were paying just 3% a few years ago might be upsetting. But if you can swing the payments that come with a mortgage at today’s rates, you may find that you’re able to refinance sooner than expected. And you may find that you’re able to benefit from owning a home in the interim.

However, before you buy a home today, run some calculations. You’ll want to make sure that your total monthly housing costs, including your mortgage payment, property taxes, and homeowners insurance premiums, don’t exceed 30% of your take-home pay.

Going beyond that threshold could put you at risk of falling behind on your expenses — housing or otherwise. And that’s not a risk you want to take.

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