15 Reasons to Buy a House Even With Rising Mortgage Rates

During the heart of the pandemic, mortgage rates repeatedly hit record lows. But things have changed dramatically. A 30-year fixed-rate mortgage now comes with an average rate above 5.00%, higher than it's been in years.

That rate can be discouraging if you're thinking about buying a home. But you shouldn't let rising rates deter you from investing in real estate. In fact, there are 15 reasons you may still want to purchase, despite your home loan being a little more expensive now than last year.

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Even though mortgage costs are higher now, homeownership can still be an excellent investment. In most cases, homes appreciate over time. So, while spending a little more to buy one may eat into the profits you eventually make, it is still helpful to have the forced savings that come with paying a mortgage and building equity.

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The U.S. Census Bureau reports that homeowners' median net worth is 80 times that of renters. Homeownership is one of the best things you can do financially. When you own your home, your housing costs also work toward acquiring a valuable asset. You do need to make sure your home is affordable, though, so be sure your mortgage payments and other housing costs don't exceed around 30% of your household income, at most.

The good news is mortgage rates being higher may reduce demand. When rates were near record lows, the housing supply was also constrained, so prices and bidding wars skyrocketed. But when high rates price some people out of buying, the resulting reduction in demand can make it easier for those still in the market to find a home at a good price.

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Although rates are definitely higher than in the recent past, they're not very expensive when you look at the entire history of mortgage costs. According to Freddie Mac's data, average rates were above 6.00% in 2006 and 2007. And average rates were even higher in the 1980s and 1990s, sometimes topping 10%. When you look at the big picture, that makes the current mortgage cost not seem so bad.

Your credit history, employment status, and debt level can significantly impact rates. If you work on improving these criteria to make yourself a very attractive borrower, you should be able to get a loan at a reasonable rate, even if a little higher than a year or two ago.

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Mortgage rates may continue going up over the coming months as the Federal Reserve takes further action to fight inflation. Although mortgage rates track U.S. treasuries and aren't directly linked to the Federal Reserve's rates, more expensive credit is still likely to affect the cost to borrow. If rates keep going up, it may be better to act soon rather than potentially find yourself waiting years for interest costs to fall.

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If you borrow now at the current higher rates and rates drop later, you can refinance to take advantage of cheaper mortgage costs. But if you wait and rates continue rising, you won't have the ability to travel back in time to borrow at today's rates. It could be better to get into a home and refinance later, if need be, rather than wait for rates to fall and find them rising instead.

When you file taxes, if you itemize instead of claiming the standard deduction, you can deduct the interest you pay on loans up to $750,000. The government subsidizes your interest costs by allowing you to pay with pre-tax dollars, meaning even with rates going up, your mortgage debt shouldn't end up costing you that much in the end.

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Once you are a homeowner, you can deduct the property taxes you pay if you itemize. You can deduct up to $10,000 in state and local taxes, including your property tax.

Being able to deduct both property tax and mortgage interest often means it will make sense to itemize rather than claim the standard deduction. This enables you to get government help affording your mortgage loan -- and this tax break for homeownership is a great reason to buy.

Waiting to purchase a home means you will be renting for longer rather than starting to make payments to reduce your mortgage balance and build equity. Missing out on months or years of equity-building and property appreciation can cost you more than the additional mortgage interest you have to pay if you borrow when interest costs are slightly higher.

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One of the biggest benefits of homeownership is that it can provide stability. You can have confidence you're able to remain in the property you own as long as you keep paying payments, unlike when renting when a landlord can terminate your lease.

The stability is often well worth paying for even at higher mortgage rates, especially if you have a family with children in school.

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Another benefit to homeownership that may be worth paying for is the freedom and flexibility to make the space your own. If you want to be able to remodel, redecorate, or create a home that suits your needs, you may be willing to pay a premium even if you get stuck with a costlier loan than you'd have had last year.

Often, homes for sale are more diverse and available in more geographic areas than rental properties. If you want a specific kind of house that is available only for sale, not for lease, you may have no choice but to buy. And if you value having your desired home enough, paying slightly higher mortgage rates to get it can be well worth it.

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Many people are also willing to pay a premium for the privacy a home can provide. That solitude can come from not having a landlord in your home to do repairs or from homes putting more space between you and the neighbors.

Regardless of whether you rent or buy, you have to live someplace. And due to inflation and various other factors, rental costs are rising in many parts of the country. If you have a choice between paying higher rent or mortgage rates, opting for the more expensive home loan is often the way to go.

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As you can see, there are plenty of good reasons to purchase a home, even if you get stuck paying more mortgage interest than you would have just a short time ago.

If you are in a good financial place and can afford the payments that will come with your loan, there's no reason to let higher rates deter you from moving forward if you feel ready for homeownership.

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