We gave up on our mortgage rate of 2.75% to buy a new home, and we don't regret it either

If you are a Zillow Doom-Scroller, you may notice that house prices will rise over time. Sometimes, during a boom or downturn, the cost of housing aircraft is the cost of a downturn, but usually, house prices rise by several percentage points per year.

My husband and I postponed the “Forever Home” for a while and grabbed our small apartment with a mortgage rate of 2.75% we scored during the pandemic. Over the past few years, we have seen supply still stagnant while property values ​​continue to move steadily upward.

So when we found a single family home that was exactly where we wanted to go to Massachusetts, we knew we had to jump on it.

I won't lie. We love our new home, but we are dealing with sticker shocks. Even if we may be able to refinance in the future, it is painful to give up our relatively cheap monthly payments in advance in the competition.

Our situation is not unique. Due to higher inventory, high prices and expensive interest rates, a large number of homebuyers are tied out of a challenging housing market. Some of us think the only way to adapt is to lock in manageable housing payments before things get more difficult. That's why we take risks.

Read more: House prices will never fall, the real estate expert said

Understand the competitive market

My family lives in a historic coastal town north of Boston and is known for its charm and stability. Since it is relatively cheap compared to Boston, it is also very desirable among potential homebuyers.

The competition for smaller available housing supply increases costs. Listing prices rose about 50% between 2020 and 2024, and homes received multiple offers and sales in a few weeks, according to Redfin data.

“This is one of the more popular communities we've seen the market take off and thrive,” said Bob Driscoll, director of residential loans at Rockland Trust.

This situation is playing a role in the U.S. in multiple markets where homeowners have been living and refuse to give up their 3% interest rate. So even if you are lucky enough to find a home for sale, to pre-approve and be happy with the mortgage rate, “you still have to deal with extraordinary competition,” Driscoll said.

Leading the rise in housing prices

When we started real estate shopping, I looked at the local market carefully. I know the prices are down a bit because the seller's home is too high. We closely monitored single-family homes in the area and noticed a beautiful property with prices falling.

The apartment we purchased in 2020 has a strong value. After calculations, we knew we could sell it and had enough time to put 20% of people on the house and pay for the closure. This strategy allows us to buy the ideal home with a realistic mortgage.

Give up lower mortgage rates

Saying goodbye to our 2.75% interest rate is hard to swallow, especially since those lower rates may never return. Homebuyers must accept this reality.

After using several popular methods to slow down our rate, we ended up getting a 6.49% rate this time. One of these methods is a temporary 2-1 buy, which means our payments are based on lower interest rates for the first two years of the loan. We used the proceeds from the apartment sales to pay for the purchase.

This strategy doesn’t save us money, but it offers a mandatory savings account and a two-year increase period during which we adapt to higher mortgage payments. Our lenders offer cost-free refinancing and we can use it as long as the price drops.

If I could redo our deal, I would probably buy discount points for a permanent buy instead of a temporary buy. That's because mortgage rates aren't falling as experts expect.

“I'm going to say that rates will stabilize and sit within the 6% range of 2025,” Driscoll said. “We don't predict any massive drop.”

Expensive monthly payments

Before we made an offer in our new home, I did some research to calculate how our spending and budget would change. This information helps me determine if we can really afford it in a new house. (We can!)

These are some of the order items I plan.

• The mortgage calculator helped me estimate our future principal and interest.
• Home Insurance Company provides quotes about properties we are concerned about.
• Property records help us estimate our monthly real estate tax bills and water/sewer bills.
• Utilities offer average monthly electrical and gas rates at the new address.
• Our auto insurance company introduced us to rate changes based on our new address.

After accepting the offer, we ordered a home inspection, which also helped us budget for future maintenance costs.

When buying a house makes sense

Buying a home is a challenge now. The price is high and the mortgage rate is high. But it's still worth evaluating whether it's right for your decision.

Some steps can help you through the entire process. For example, getting pre-approval can help you create a housing budget. This step can also enhance your position in the competitive market because the seller knows that you already have a lender on board.

Consider the fun you pay for each month and try not to focus too much on mortgage rates.

“If you love this house, you can afford it and qualify for that rate,” Driscoll said. “You can control that over time.”

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