FamDoc41ParticipantStatus: PhysicianPosts: 5Joined: 05/02/2018
I am trying to consider renting a townhouse for the next year while saving up money for a more substantial down payment vs purchasing a house now. I am in a stable personal and professional l setting and plan to be here for at least the next 7+ years. Based on income/debts I feel that I can afford a home up to 400k. My original thought was to rent the townhouse for a year and save for the down payment, but a friend who is a retired real estate agent told me that interest rates are rising quickly. She stated that she estimates the rates rising from 4.2 to over 5-6% in the next year. She stated that any benefit that I may gain from saving up a more substantial down payment would be more than erased by the higher interest rate in a years’ time. I live in a very hot housing market and house prices are rising constantly as well.
I also feel that I am on a time crunch as my current apartment lease ends next month and I need to end that lease or go month-to-month for an extra $150/month. Renting the townhouse would give me a larger home closer to work and also save about $300/month but the offer to lease the townhouse ends on Tuesday and so I need to make a decision soon or ask the owner for an extension.
In considering the possible mortgage interest rate rise, I think it may be better to stay month-to-month for a few more months in my current apartment while looking at homes in my price range and try to move quickly instead of taking the townhouse rental and being locked-in to that for 12 months. Am I thinking this through all wrong? What would you suggest? Should I worry about the rising interest rate? Any advice is appreciated. Thanks!February 11, 2019 at 5:34 pm MST #190019AnneParticipantStatus: PhysicianPosts: 1163Joined: 11/07/2017
I don’t know if you should buy a house right now and am going to stay out of that discussion. When you are in the market for a house you should be in a position to take your time and look–you shouldn’t feel like you are in a big time crunch, if the house inspection comes back with something that would normally be a deal breaker or you have other doubts about the house you don’t want to buy it anyway because you feel like you need to buy a place right away. If now (or the next x months) is the right time, then the extra $150/month for the luxury of taking your time is no big deal. I’d take that any day over the hassle (and cost) of moving twice.
Except in rare regions (where you can’t get a place for $400k anyway) hot housing markets don’t last forever. It’s going to slow down at some point, esp as interest rates rise, and then you can probably get a better price on the house which will balance out the rising interest rate. Keep in mind that people have gotten used to ridiculously low mortgage rates for the past 8 or so years, it’s all relative. Ask someone what interest rate they paid for the mortgage they got in the late 70s/early 80s and 5-6% no longer seems bad. More motivation to pay it off early.
So basically my advice is to cool your jets and take your time either way. I’ve never seen a “limited time” offer that really turned out to be a great deal–getting people to rush to make a purchasing decision is just a marketing ploy to trick rational people into thinking irrationally.ENT DocParticipantStatus: PhysicianPosts: 3502Joined: 01/14/2017
I wouldn’t feel pressured to make a major life decision because of fear put into me by one person, friend or not. All due respect to them, but they don’t know where rates will be in a year. Ask them if they’re currently shorting intermediate and long term treasuries. No? Why not if so sure?
You have two options – commit to buying now or not. If not then just rent and let them know. If committing to buying I see renting month to month as the most viable option for you. But make the decision based on whether you can afford the home you want now, not future prognostications. If you don’t have enough saved and buying would make you house poor/hurt cash flow then just wait and let the chips fall where they may.CordMcNallyParticipantStatus: PhysicianPosts: 2817Joined: 01/03/2017
I don’t know your entire financial situation but based on what you’ve mentioned, I would probably go month to month and then take my time trying to find the right house. I also wouldn’t listen to your real estate friend. House hunting can take a long time and buying a house isn’t something you want to be forced or pressured into doing. An extra $150/month is worth the flexibility.
“But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
― Benjamin Graham, The Intelligent InvestorFebruary 11, 2019 at 7:16 pm MST #190036ZaphodParticipantStatus: Physician, Small Business OwnerPosts: 6177Joined: 01/12/2016
RE agents always feel that way about rates. Truth is rates are now on hold for a bit, who knows how long that lasts but I’d just about bet pretty damn big that we wont see 6% anytime soon and nearly guarantee that within the year. We are more likely (based on historical precedent) to see a cut before another raise. I’d like that not to be true though, given what that means about the economy.adventureParticipantStatus: SpousePosts: 1183Joined: 10/24/2016What would you suggest?Click to expand…
Take your time, rent where it’s comfy, take your time to find the right place to buy. I’d happily pay $150/month to know I didn’t have to move!!February 12, 2019 at 5:39 am MST #190094SimsimaParticipantStatus: PhysicianPosts: 22Joined: 05/07/2018
I would not buy with that level of urgency. This is the biggest purchase of your life probably. Renew your lease or move to a bigger place if you need to. That way you have time to really look for the house you want. You can even break your lease if you find a good house in the middle of your lease. Just dont rush this big decision. The home buying process can be is very stressful.February 12, 2019 at 6:02 am MST #190097