The 2019 housing market is probably best described as a standstill. There are less homes on the market, higher interest rates than in past years, and more people are staying right where they are.
But just because there’s not much action in the housing market right now doesn’t mean you can’t capitalize on current opportunities. Here are some smart housing moves you can make this year to save or make you money:
Refinance for a 15 Year Mortgage Loan
Home prices have been on the upswing since 2011.
This is good news for homeowners who have been in their home for awhile and are looking to refinance into a 15-year loan. There are a few reasons why that is.
First of all, your home is probably valued at a higher amount than it has been for about 8 years. This means you have a lower loan-to-value ratio, and are likelier to qualify for a 15-year loan.
Interest rates are rising, but they are still historically low. So if you plan to refinance, a 15-year loan is likelier the better deal, if it’s affordable for you. That’s because a 15-year mortgage carries a lower interest rate. Couple that with a shorter term loan and you’re going to save on interest.
For example, let’s say you took out a $400k mortgage over 30 years. You would end up paying about $287k in interest with a 4% interest rate. If you shortened it to 15 years, however, you would pay $132k in interest. That amounts to a savings of about $155k.
Finally, a 15-year loan will also allow you to build equity faster while paying less in interest rates. And if you hope to retire without a mortgage payment, this could be the best way to get there with a lower interest rate than your 30-year loan.
Sometimes the best thing you can do for your finances is to wait. And with the current housing market, this is the case for many people.
The current mix of higher mortgage rates and low housing inventory means people are staying in their current houses longer. People stay in their homes an average of 13.3 years. That’s down slightly in recent years, but it’s still been historically high since the 2008 housing collapse.
Interest rates are at their highest since 2011, which isn’t incentivizing people to get out and buy. Interest rates are expected to continue to go up this year, so it might be a good time to hunker down, build equity and make improvements to your current home.
If you can afford to wait, it may make sense to wait for a buyers market. For example, in New Hampshire there is a very low housing inventory available right now. When that’s the case, it can make sense to wait and get more bang for your buck in a couple years.
However, if you plan to buy regardless of the market, there should be more options soon. As Baby Boomers move out of homeownership, there will be an influx of homes on the market to choose from.
Do you need help preparing for retirement? Contact me today to set up a meeting to talk about your goals. You can also download my free ebook for physicians for tips and information about getting your finances on track.