- Karina Mejia is looking to expand her portfolio of properties, despite high interest rates.
- It’s a better time to buy now than last year, she said, because you can actually bargain.
- In addition, owning a house will protect you from possible rent increases.
Karina Mejia is looking to expand her real estate portfolio by six properties.
“I really believe it’s still a good time to buy — and I’m not saying that because I’m an agent,” the 25-year-old real estate agent and investor told Insider. She owns houses in Bostonwhere she lives, and Augusta, Georgia.
Despite high interest rates — the the average fixed rate over 30 years is 6.37% as of November 11, 2022, compared to 3.3% last November — there are advantages to buying a property now.
“It’s a much better time to buy now than this time last year,” she said. “Now buyers have the ability to do the things that they should have done, like inspection contingencies and appraisal contingencies, and they have the ability to get a deal. Now you box negotiate and get houses at a discount.”
Whereas, when the market was at its peak, “you couldn’t get your offer accepted if you didn’t go way beyond the requested and waived inspections and assessments.”
In addition, owning a house will protect you from possible rent increases.
“You’re not going to see your mortgage rate fluctuate the way a lease payment can every year,” Mejia explained. “Some rental leases go up by $200 every year. That’s pretty drastic. Owning a home also comes with tax advantages, like having your mortgage insurance written off, and you’ll have the benefit of accumulating equity and refund your own mortgage, rather than someone else’s.”
That said, it costs more to own a home – when rates are higher, monthly mortgage payments are higher – and you shouldn’t buy unless you absolutely can afford it.
“I think it would be a disservice to say that now is a good time to buy for Everybody“, Mejia said. “You don’t want to jump into a monthly payment that doesn’t work for you. This is especially important to consider in today’s economy, in which people could lose their jobs.”
A wave of layoffs is already sweeping the United States. Big companies like Meta, Twitter, and Redfin have announced cuts so far.
As a potential buyer, you also need to consider your timeline: do you plan to stay in your home for the next five to ten years? Or do you think you will make a move in two to three years?
If you’re looking to buy and potentially sell within three years or less, you’ll probably want to wait to buy, Mejia said: “Values go up and down, up and down, up and down. If you’re going sell in that quick time period, the property might actually be worth less.You don’t want to put yourself in a position where you could lose money.
It will be safer to buy if you plan to stay there for a while. Your home will have more time to appreciate in value, which will help offset the expensive transaction costs that come with buying, like your agent’s commission and closing costs.
Prospective buyers should also look into relief programs in their area, she noted: “It’s market specific, but what you tend to see when there are interest rate hikes interest is more down payment assistance programs to help with affordability.”
For example, in its main market, Boston, Massachusetts, there is a program called MassDREAMS provide down payment and closing cost subsidies to first-time home buyers.
“It’s basically a grant of up to $50,000 for a first-time home buyer to buy their first home,” Mejia explained. There are specific eligibility requirements: you must live in one of the 29 communities that have been disproportionately affected by the COVID-19 pandemic and the amount you can receive depends on your income.
In general, “I wouldn’t be afraid to buy. I think that’s a mental hurdle that people have to overcome right now,” Mejia said. “If you can still afford a mortgage payment in your current market and buy a home you’d like, then buying makes perfect sense.”