{"id":4127,"date":"2024-10-28T14:29:27","date_gmt":"2024-10-28T19:29:27","guid":{"rendered":"https:\/\/tomo.com\/blog\/?p=4127"},"modified":"2025-02-10T12:26:18","modified_gmt":"2025-02-10T17:26:18","slug":"better-to-buy-now-or-wait-for-interest-rates-to-drop-weve-got-the-answers","status":"publish","type":"post","link":"https:\/\/tomo.com\/blog\/better-to-buy-now-or-wait-for-interest-rates-to-drop-weve-got-the-answers\/","title":{"rendered":"Better to buy now or wait for rates to drop? We\u2019ve got the answers."},"content":{"rendered":"\n

Let\u2019s be real\u2014interest rates matter<\/strong>.<\/a> Even a small percentage change can make a huge difference over time. For instance, on a $400,000 loan, a 6% interest rate gets you a monthly payment of about $2,398, while a 7% rate bumps that up to $2,661. That\u2019s a $263 difference every month. Over eight years (the average time people keep a mortgage), you\u2019d end up paying around $25,248 more at 7%. Over the full 30 years? You\u2019re looking at a whopping $94,680 extra.<\/p>\n\n\n\n

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But how often do rates drop by 1%?<\/h3>\n\n\n\n

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Spoiler alert: not often. A full \u201c1% drop\u201d in mortgage<\/a> rates is pretty rare unless there\u2019s some major economic upheaval. (Side note: When we say a 1% change, what we mean is the interest rate goes from 5.5% down to 4.5%, which is technically a change of 100 \u201cbasis points.\u201d But if you\u2019re reading this article, chances are you\u2019re not a macroeconomist, so we\u2019re avoiding all that basis point jargon). <\/p>\n\n\n\n

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During crazy times like COVID, the single biggest drop<\/a> in a week was 1%, and that was the biggest change since the 2008 financial crisis. Typically, rates move in much, much smaller increments\u2014like 0.05% to 0.25%, in the extreme, over a two week period you might be thinking about locking in your interest rate. That means a difference of about $10 to $53 per month. <\/p>\n\n\n\n

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Is it worth waiting for rates to drop before buying?<\/h3>\n\n\n\n

<\/p>\n\n\n\n

In most cases, waiting doesn\u2019t pay off<\/strong>. Of course, even $10 per month isn\u2019t nothing. But knowing whether it\u2019ll swing up or down day to day is impossible to predict. You\u2019re better off playing the long-game\u2014pick the right lender (ahem, like the one with some of the lowest interest rates in America), and plan to refinance when there\u2019s major movement in the market. Figuring out the exact moment to lock in your rate is basically a roll of the dice. Could luck out, or not, but probably nothing to lose sleep over.<\/p>\n\n\n\n

And, sure, a slightly lower rate sounds nice, but you have to weigh that against the bigger picture. Home prices have been rising, and if you wait and prices go up by even 0.5%, you could end up waiting months. And waiting months means you might end up paying way more than what you\u2019d save with a lower rate. <\/p>\n\n\n\n

For example, if home values rise a modest 5-7% per year, if you wait 4 months for rates to get 0.5% better, your $400,000 theoretical home will now cost $410,000 and that\u2019ll completely wash out any savings you might have gained on a lower interest rate. Plus, buying now means you start building equity<\/a> and reaping those sweet tax benefits <\/a>right away, instead of throwing more cash at rent.<\/p>\n\n\n\n

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Other things to think about besides interest rates<\/h3>\n\n\n\n

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Rates are important, but they\u2019re not the whole picture. You\u2019ve also got to consider things like market supply<\/strong>, local economic trends<\/strong>, and the job market<\/strong>. If new businesses are moving into your area or there\u2019s a housing shortage, prices could skyrocket, and waiting could cost you big. Also, a strong job market means more competition for homes and better financial security for handling a mortgage. Bottom line: It\u2019s not just about rates\u2014it\u2019s about timing the market.<\/p>\n\n\n\n

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Can you predict mortgage rate changes?<\/h3>\n\n\n\n

<\/p>\n\n\n\n

Following the twists and turns of mortgage rates can feel like chasing a moving target. But unlike the stock market, where things can swing wildly overnight, mortgage rates move slowly<\/strong>\u2014unless we\u2019re talking about something massive like a global financial crisis.If you want to geek out on predicting rate changes, keep an eye on the Federal Reserve<\/strong>. If they hint at raising rates to fight inflation, mortgage rates usually follow before the Fed even makes an official change.<\/a><\/p>\n\n\n\n

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See interest rate predictions<\/a><\/div>\n<\/div>\n\n\n\n

<\/p>\n\n\n

Emanuel Santa-Donato<\/a><\/p>

As Senior Vice President and Chief Market Analyst, Emanuel leads Tomo’s Financial Products and Growth functions. He has an extensive background in macroeconomics and systemization (Bridgewater Associates) and a passion for creating solutions to the housing affordability problem. He has been working alongside the largest financial institutions in the country, including Fannie Mae and Freddie Mac, for the past 8 years, to modernize the mortgage industry.<\/p><\/div><\/div>\n\n\n

<\/p>\n\n\n\n

If you’re ready to start your journey to homeownership, get pre approved with Tomo Mortgage today.<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Let\u2019s be real\u2014interest rates matter. Even a small percentage change can make a huge difference over time. For instance, on a $400,000 loan, a 6% interest rate gets you a monthly payment of about $2,398, while a 7% rate bumps that up to $2,661. That\u2019s a $263 difference every month. Over eight years (the average […]<\/p>\n","protected":false},"author":22,"featured_media":4128,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"","fifu_image_alt":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[13,285],"tags":[],"class_list":["post-4127","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-home-buying-guide","category-home-buying-tips"],"aioseo_notices":[],"jetpack_featured_media_url":"https:\/\/tomo.com\/blog\/wp-content\/uploads\/2024\/10\/better-to-buy-now-or-wait-for-rates-to-drop-tomo-mortgage.jpg","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/tomo.com\/blog\/wp-json\/wp\/v2\/posts\/4127","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/tomo.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/tomo.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/tomo.com\/blog\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/tomo.com\/blog\/wp-json\/wp\/v2\/comments?post=4127"}],"version-history":[{"count":3,"href":"https:\/\/tomo.com\/blog\/wp-json\/wp\/v2\/posts\/4127\/revisions"}],"predecessor-version":[{"id":4133,"href":"https:\/\/tomo.com\/blog\/wp-json\/wp\/v2\/posts\/4127\/revisions\/4133"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/tomo.com\/blog\/wp-json\/wp\/v2\/media\/4128"}],"wp:attachment":[{"href":"https:\/\/tomo.com\/blog\/wp-json\/wp\/v2\/media?parent=4127"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/tomo.com\/blog\/wp-json\/wp\/v2\/categories?post=4127"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/tomo.com\/blog\/wp-json\/wp\/v2\/tags?post=4127"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}