Record Interest Rate Lows – Consider Building A Nest Egg
Interest rates on 15 and 30 year mortgages are at record lows this week yet buyers seem to be leaving the market in droves. One reason for this is the increase in those looking to refinance rather than buy. It’s a catch 22 since fewer buyers lead to fewer sales, and a dropping in real estate prices. As real estate prices drop, those with mortgages become reluctant to sell and buy up.
There are a number of options. For those with extremely good credit ratings and decent deposits, buying into a larger property, a property that will meet their needs for the next 10-20 years, could be a smart move. Prices are low, interest rates are low and, over time, the home will start to appreciate in value. The question always remains, what to do with the current property?
Selling may well see your home priced at tens of thousands of dollars below what you paid for it. It can be a balancing act. Lose money on one but, over time, recoup that and more on a larger property. It’s risky, and if takes six months to sell, you could be caught with two mortgages to pay.
A second alternative is to place one of the properties onto the rental market. When demand for housing drops, there is always a counter demand in rental properties. We are seeing this now with rental values in Maryland making it much more economical to buy than rent – yet many are wanting to rent and are finding suitable rental properties hard to find.
If your credit is good, and you have a decent deposit, entering the market as a potential landlord could see you building a decent nest egg for the future. If you look back in history, many of our richest families started out by buying properties when the markets were low. It’s food for thought.
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