Interest rates are one of the biggest topics of the summer—and may be an important issue in building a custom home. With rates increasing, people are wondering if they should delay building their custom home. We believe there are more elements that should be factored into the equation. Such as, if it’s something you’re excited about, something you’ve been planning and budgeting for, waiting might not be the best idea -- financially and emotionally.
Real estate doesn’t tend to get cheaper over the long term. It’s tempting to wait out mortgage rates, but the fact of the matter is that the cost to build a custom home rarely goes down. Even as the current surge in material prices and labor costs slows, historically prices rise, so the savings you might see if mortgage rates go down may be swallowed by other expenses.
Consider the fact that your interest rate is spread out over 30 years, but the hard costs of building a home get factored into your mortgage right now, therefore impacting what you qualify for and what your monthly payment will be. A quick calculation on mortgage rate calculator shows that a 6.0% rate on a $600,000 loan will result in a monthly payment of $3,597; a 5.5% rate on a $700,000 loan two years from now results in a monthly payment of $3,975. And, keep in mind that you have the option to refinance your mortgage if rates drop down the road.
What’s more, if you are using the sale of your current home to fund building your new custom home, now is still a good time to sell. Although the overall number of homes selling has decreased, the prices are staying high – meaning it is a great time to take advantage of the market.
Aside from the direct monetary costs, it’s also important to consider the emotional side of waiting to build your dream home. Staying where you are, whether in a location or house you don’t love, means that life continues to feel unsettled. It means you’ll still be dumping money into the home to make fixes and repairs. It means less time living the life you’ve dreamed about. Time and time again, people say that in hindsight, they wish they hadn’t waited. It’s rarely the other way around.
Certainly, building a custom home is a big decision, but if you’ve been saving and planning and are financially ready, don’t let mortgage rates deter you from your plans. You’ll end up costing yourself more money while putting your dream home and new life on hold.
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