What experts say about buying a home now and refinancing later

Source: CBS News

With interest rates remaining high, would-be homebuyers may be asking themselves: In this economic climate should I buy a home now at high rates and refinance later, or should I wait for rates to fall?

For instance, buyers who are in the market while interest rates are high may have certain advantages that they otherwise wouldn’t, such as less competition and more negotiating power. While they still have the option to refinance, they also have the opportunity to build equity and wealth. Experts also advice as with many financial questions, it will depend on your financial situation and forces outside your control.

Robert Johnson, a professor at Heider College of Business at Creighton University, points out that purchase price and mortgage rate are the two primary financial factors potential homebuyers consider when buying a home, but there’s a critical distinction between the two.

“What many fail to understand is that only one—mortgage rate—can be renegotiated,” says Johnson. “Once a home is purchased, you can’t renegotiate the purchase price. What this means, in my opinion, is that if you find a home you believe is priced attractively, I would be more apt to pull the trigger than if mortgage rates are attractive and home prices seem high. In financial terms, you have optionality for the remainder of your mortgage to renegotiate terms. You don’t have that option with a purchase price.”

As the saying goes, “Marry the home, but date the rate.”