Owning a home with an affordable mortgage may seem like a dream, but for many Americans, it’s starting to feel like a trap.
According to an Edelman Financial report, half of homeowners under 50 feel trapped in their current homes. Financial constraints are a key factor: 25% say they can’t afford to move, while 21% believe they couldn’t afford a new home they’d want to live in.
Rising interest rates are a big issue. Many homeowners obtained mortgages when rates were below 4%, but with current rates hovering above 6%, moving could mean a significant increase in housing costs.
The desire to relocate is strong. Over 40% of Americans — and 56% of those in their 30s — say they’d consider moving out of state to save on housing costs. Yet, with low interest rates unlikely to return anytime soon, this may not be an option.
If you’re feeling stuck, here are three strategies that could help.
If high borrowing costs make homeownership feel out of reach, consider using your home equity to lower your interest rate.
Home prices have soared nationwide, rising 47.1% since early 2020, meaning many homeowners could sell their property for a generous profit. By using that profit for a larger down payment and purchasing pay points, you can bring down your interest rate.
Points cost 1% of your loan amount and typically lower your rate by 0.25%. Combining a bigger down payment with points could make moving more affordable, especially if you’re relocating to an area with lower housing prices.
Selling your home doesn’t mean you have to buy another right away. Renting can be a practical interim solution, especially since rent prices, though rising, haven’t soared as much as housing costs in many areas.
Some cities still offer rental options that are cheaper than buying a house, allowing you to wait for interest rates to fall. The Federal Reserve has hinted at potential rate cuts through 2025, so renting could position you for a better mortgage deal down the line.
Read more: 5 ways to boost your net worth now — easily up your money game without altering your day-to-day life
Although the days of 3% and 4% interest rates are behind us, there is a loophole you might consider: assumable mortgages.
