15 Reasons Rising Rates Shouldn't Discourage You From Buying a Home

In mid-May 2021, the average mortgage rate on a 30-year loan was just over 3.10%. Now, it's hovering around 5.52%.

With interest rates up so much, many people considering purchasing a home may be asking themselves whether it's actually a good time to move forward.

The reality, however, is there are many good reasons why you shouldn't let higher mortgage rates deter you from becoming a property owner if you're financially ready to do so. Here are 15 of them.

5 Stocks Under $49

Presented by Motley Fool Stock Advisor

We hear it over and over from investors, "I wish I had bought Amazon or Netflix when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" It's true, but we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Click here to learn how you can grab a copy of "5 Growth Stocks Under $49" for FREE for a limited time only.

Although rates are quite a bit higher than they were a year ago, they are still reasonable in light of historical mortgage rates. In fact, the average annual rate was above 6.00% as recently as 2008, and homebuyers in 1999 and 2000 faced average rates above 7.00% for the year.

The reality: Even a 5.00% 30-year fixed-rate mortgage is relatively affordable and shouldn't put you off a home purchase if you can afford the monthly payments.

ALSO READ: Why Mortgage Rates Are at Their Highest Since Before the Pandemic

Buying a home generally pays off for most people in the long term, even if they don't get a mortgage at rock-bottom rates. Property values go up over time, and a home serves as a sort of forced savings as property owners pay down their loans and build equity in their homes.

Unless you are a great investor who is going to put the money that you'd have spent on a house purchase into stocks or other investments that produce a high rate of return, chances are buying a house is going to be one of the smartest things you'll do with your money.

If you try to wait until mortgage rates fall to buy a home, you could be waiting for months or even years. During that time, home values may go up.

If that happens, you could have to buy at a higher price later and would miss out on the chance to make the profits that would've come your way had you purchased sooner.

ALSO READ: Why Is Real Estate a Good Investment?

Homeowners have a median net worth 80 times larger than the median net worth of renters, according to the U.S. Census Bureau. Over time, most of those homeowners didn't necessarily qualify for the lowest possible mortgage rates.

This data suggests homeownership goes a long way toward building wealth -- even if you didn't qualify for a mortgage with record-low financing charges.

National average rates are only one factor that determines what you'll pay for a loan.

If you've improved your finances substantially over the past few years, it's possible that you will qualify for a lower rate now than when national average rates were lower but you had lower credit, more debt, or less income.

It's worth at least checking what rates are available to you now, even if they are up.

5 Stocks Under $49

Presented by Motley Fool Stock Advisor

We hear it over and over from investors, "I wish I had bought Amazon or Netflix when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" It's true, but we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Click here to learn how you can grab a copy of "5 Growth Stocks Under $49" for FREE for a limited time only.

Rates very well could go higher before they drop again -- if they fall at all. If you're waiting for rates to come back down, you could end up waiting for years.

Most people don't want to put off homeownership for that long and shouldn't because of the other financial downsides associated with delay.

ALSO READ: The Federal Reserve Just Raised Interest Rates -- What Does it Mean to You?

Home prices surged when mortgage rates hit record lows. Many people wanted to take advantage of the chance to buy a property with an affordable loan.

There's some evidence to suggest prices may come down if escalating rates cause a decrease in demand. If that's the case, your home purchase may not cost more, even if you have to pay more interest on your mortgage.

When many people were trying to buy a home during the heart of the pandemic to take advantage of low mortgage rates, it was difficult to get an offer accepted on a home.

Many buyers found themselves in bidding wars or making repeated offers, only to find they had been outbid. With rising mortgage rates resulting in loans becoming more difficult to qualify for, there is likely to be less competition for homes.

ALSO READ: Why Everyone's Making Such a Big Deal About Housing Inventory

Housing inventory was tight during the pandemic due to high demand resulting from affordable home loans and because fewer people wanted to list their properties during the heart of the COVID-19 crisis.

With the crisis waning and mortgage costs going up, there are likely to be more houses on the market that take longer to sell. This gives you a better chance of finding a home you actually like and want to make an offer on.

There are a limited number of rental properties available in most areas throughout the country, and demand for them is high. So, you may not be able to find a rental that meets the criteria you are looking for -- especially if you want a larger single-family home in a good school district or a house with a big yard.

If you can't find a rental that meets your needs, it makes no sense to stay in housing that's not right for you just because of high interest rates on homes. As long as you can afford the costs, you should go ahead and buy the property that fits your lifestyle.

5 Stocks Under $49

Presented by Motley Fool Stock Advisor

We hear it over and over from investors, "I wish I had bought Amazon or Netflix when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" It's true, but we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Click here to learn how you can grab a copy of "5 Growth Stocks Under $49" for FREE for a limited time only.

If you itemize on your taxes, you can deduct the interest on mortgages valued at up to $750,000. With the government subsidizing some of your costs, the additional interest you'll owe due to rising rates won't put as much of a dent in your budget.

ALSO READ: What Is the Mortgage Interest Deduction?

With each mortgage payment you make, you build more equity in your home and get closer to paying off your loan. If you wait months or even years to buy a property due to today's rising rates, it will delay when you can begin working on owning your home free and clear.

As a result, you could face more debt later in life near retirement.

When you purchase a property, you aren't committing to your current mortgage forever. If rates do drop again in the future, you can refinance your loan and lower borrowing costs.

If rates don't drop, though, you get to keep your current rate -- as long as you choose a fixed-rate loan.

ALSO READ: How to Refinance Your Mortgage

Putting off buying a home because of rising interest rates doesn't necessarily mean you'll be able to escape an increase in housing costs.

Rents are also rising in many parts of the country. If your costs will go up anyway, you may as well be making payments toward owning your own place (as long as you can afford it) rather than sending more money to a landlord each month.

Finally, high inflation rates are expected to continue, at least for the foreseeable future.

If you get a fixed-rate mortgage payment, your payment will not change, even as the value of your money declines due to inflation. The result is that your mortgage loan will effectively get cheaper to pay over time.

5 Stocks Under $49

Presented by Motley Fool Stock Advisor

We hear it over and over from investors, "I wish I had bought Amazon or Netflix when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" It's true, but we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Click here to learn how you can grab a copy of "5 Growth Stocks Under $49" for FREE for a limited time only.

Ultimately, if you are financially ready and can find a home at a reasonable price, you probably shouldn't let rising mortgage rates stop you from making a purchase.

As you can see, there are plenty of reasons why other factors should likely take precedence -- and why your choice to buy a home could pay off even if you can't get a loan to purchase it at rock-bottom rates.

The Motley Fool has a disclosure policy.