Keep Calm and Carry On: Words of Wisdom for 2019’s Low Interest Rates

“Make hay while the sun shines!”

If you’re considering buying a home, you might be feeling some pressure to act –

“Get it while the gettin’s good!”

Mortgage rates have been dropping, so this might seem like a ‘do-or-die’ moment to apply for a loan –

“Strike while the iron is hot!”

That eager, anxious voice in your head might be urging you –

“Interest rates have gone down, so now is the time to borrow money and buy a home! If I don’t do it now, I’ll miss out!!!”

Sure, that inner voice might sound convincing, but it’s probably not qualified to give sound financial advice. Be careful! Just because you can get a low rate doesn’t make the decision a no-brainer.

Taking out a mortgage is kind of like getting a short haircut; you might not realize how much you loved your long hair until it’s too late. Buying your dream home might seem like the way to go, but once you’ve saddled yourself with a 30-year loan, you may very well find that you miss being debt-free. No matter how low the interest rate, debt is debt. In the case of a mortgage, debt is a lot of debt. You’ll take on an obligation to repay it, and you’ll often carry that obligation for quite a long time, so don’t just leap before looking.

Even though deciding to pay rent for another year or two can feel like deciding to throw more money down the drain, remember that it’s a relatively low-risk proposition; would you rather be locked into paying your landlord for another year, or locked into paying the bank principal plus interest for thirty years? Plus, renting can be a useful first step towards investing in a home. Perhaps you have a new job with a nice fat salary, but that job requires that you move to a new city. Not only does renting give you the chance to be sure that you like living in the area before committing to a mortgage, but it also gives you some time to know that your job is stable and your income is secure. The last thing you want is to be in over your head with a huge mortgage.

All this is to say that borrowing to buy a home is a big deal, so don’t let low rates cloud your judgment. By all means, when the time is right and it makes sounds financial sense, go for it! When done with patience and care, buying a home will feel like a landmark, like one of the best decisions you’ll ever make. But it won’t feel like a no-brainer. Take your time . . . make it a full-brainer! You won’t regret it.