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The housing market is fickle. Rates can change at the drop of a hat, and there’s no guarantee of anything staying the same for any length of time. What seemed like a great idea originally can turn sour within a few years with bad luck, so what can be done when that interest rate goes up?

Homebuyers can buy their interest rate down with what they call points. Some lenders are offering to buy down interest rates to last year’s level for the first year or two. Other options for lowing interest rates include refinancing, making larger payments, and renting out part of the property.

Keep reading to find out what to do about interest going up, what can be done about it, and how Buyers’ Slice Realty can help.

Why Do Interest Rates Go Up?

The housing market has very few guarantees. Unless a homebuyer has stellar credit and happen to get in on low fixed rates, those mortgage interest rates are going to shift based on current market trends and inflation. That means that eventually, payments might get to a point where they become difficult to pay. This leads to homeowners looking for ways to lower these rates to something more feasible.

Using Points to Lower Your Mortgage Interest Rate

Buying down a mortgage interest rate is a common practice and typically comes in the form of points. These points need to be purchased upfront but can help to lower the interest rate to what it was the year before. This is extremely useful if the market has suddenly shifted and has caused the rates to shift on existing mortgages.

Typically, points are expected to cost about 1% of the overall loan and allow for the rate to be lowered by approximately .25% per purchased point. It is important to note that each lender has their own pricing and policies regarding this method, so be sure to check in with them on the exact rate.

Consider Refinancing for Older Mortgages

What was a good or necessary deal back when purchasing a home doesn’t always continue to be as time goes on. If the rate wasn’t fixed, it can start to get difficult to pay as that interest rate increases. Buying down the rate stops being an option after a few years, but there is still hope.

Refinancing allows a home-buying mortgage rate adjustment and can result in significant savings. It does come with a new, upfront closing cost of 1-1.5% of the new loan amount but might be a good idea if credit has improved enough to qualify for better rates.

Make Larger Payments

If possible, making larger payments is a great way to lower the remaining amount of the loan, which in turn helps to reduce interest. Many homebuyers opt to only ever paying the minimum, exact payments that appear on their monthly statements. It’s convenient and what is due. However, it is completely acceptable to make larger payments if it’s feasible to in order to drive down the interest and finish payments sooner. Just be sure to check for any clauses that penalize early repayment!

Rent Out Part of the Property

Renting out part or all of the property is a viable method of gaining passive income that can be used to pay on a mortgage. That can be as simple as renting out a room, a spare building, or even part of the lawn. There’s also the option to become a landlord entirely and rent out the whole property, as long as there wasn’t any agreement otherwise.

Usually, renting out part of the property is fine, but some mortgages have clauses for turning properties into rental units, so be sure to look over everything before diving in. Don’t be afraid to ask for help double-checking and getting the legalities out of the way.

Conclusion

The world of homebuying is difficult no matter how its sliced. Mortgage rates increase and decrease at the drop of a hat and can end up causing issues with repayment. Thankfully, if the interest rate has increased, there are some things that can be done to help ease the blow a bit. This includes buying down the rate with points, refinancing, renting out, and making larger payments if possible. Be sure to get help from professionals such as those at Buyers’ Slice Realty to make sure that everything is done properly and the best rate is procured.

Buyers’ Slice Realty is Here to Help

There is nobody like Buyers’ Slice Realty when home buying in Colorado. Buyers’ Slice cuts out the middleman by letting buyers find what they want to look at themselves and then help them make the offer, do the paperwork, and close the deal. Commission earned is then split with the buyer at closing to leave more money in their pocket and get them into the home of their dreams.

Ready to save big? Contact Buyers’ Slice Realty to learn more!