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  • Writer's pictureRachel Barrasso

Pros and Cons of "Buy Now Refinance Later"



A while ago, I wrote a post about whether or not you should Marry the House and Date the Rate. The idea behind this slogan is that you buy the house you want to stay in at today's interest rates (because, I mean, you have to). When interest rates go down you refinance. This was a really popular theme for realtor and lender marketing over the past two years, and I want to revisit it now that rates are hopefully on the decline. So, should you do it? Let's go over the pros and cons.


The biggest pro is that for those who 'married' a house two years ago, you've gained a huge amount of equity over those two years or so. You were able to buy a house at that 2022's prices, which turned out to be a great investment! Congrats! Even though your interest rate was high (it peaked in the eights!) you've been making money each month just by owning your home.


Two years ago when rates started to rise, we weren't sure what the economy or the housing market would do. Although 2022 homeowners will have a great opportunity to refinance this year (for a lower rate and with more equity, maybe even ditch the PMI!), it was a risk to buy if you were counting on being able to refinance and lower your payment.


If you could only afford your payment just barely and maybe you were dipping into savings or relying on credit cards each month to make it but that was ok because you were just waiting on rates to come down, this was a huge gamble and, in my opinion, not a safe move. You should only buy what you can comfortably afford now and into the future.


The market very well could have had a housing correction where homes lost value. In this case, many people would not be able to refinance and would be stuck with rates they could hopefully still afford. This is probably the biggest con to this strategy. Even if the housing market stays strong, you may not be able to refinance. You could lose your job or your income levels could change to where you would no longer qualify for your loan. Even though a refinance is essentially just restructuring your current debt, you still have to qualify as if you were buying a home for the first time.


If you can comfortably afford a higher rate on your home for the forseeable future, I think dating the rate is a great idea! You should refinance if rates come down! But, I don't think it should ever be something that you're counting on, because markets are uncertain. As long as you can make today's payments for as long as you need to, feel free to start shopping around as soon as rates are looking better!


The bottom line is: Yes, you should marry the house and date the rate. BUT, make sure the rate you have now is comfortable, just in case there actually aren't any better fish in the sea anytime soon!

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