The following is a guest post on mortgage strategies while rates are at generational lows:
It’s tough to ignore what’s going on with mortgage rates around the world right now. With Central Banks committed to keeping their lending rates low, mortgage rates, at least in most developed nations, continue to hover at generational lows. There are a few things I’ve looked into to see how I can capitalize on the situation. Primarily, checking out a mortgage calculator and thinking about various avenues to exploit the situation is the first step.
- New Home Purchase – This is a major commitment and anchors you to a particular locale, but if you have steady employment and want to escape the recurring payments to a landlord, this is the obvious next step. Why continue to pay the mortgage for a landlord permanently if you’re going to stay in the same spot for an extended period of time? If you’re recognizing that housing could remain flat or even decline further, but think offsetting your expenses with equity build is worthwhile, now’s an optimal time!
- Refi – With rates low as long as they have been, many people in a position to refinance already have. In some cases though, people haven’t had the finances or credit to do so, so they continue to pay higher rates. With various government programs helping to loosen credit requirements and fees, or even the consideration of borrowing to do so, it might just make sense over the long-term, especially if your current rates are high.
- Rental Real Estate – If you have the capital available, it’s virtually always a good time to get into rental real estate. Whether it’s starting small with buy to let mortgages or even going larger with a partner or group, the benefits range from diversification away from other asset classes to the benefit of leverage. The downsides do of course include risk of loss, and any “investment property” should have a very long time horizon as it’s about as illiquid as it gets from an investment standpoint, but if you’re in it for the long-term, it’s certainly worthy of consideration.
- REITs – If none of these options are available to you given the larger capital and credit requirements, it might be worthwhile checking out the various real estate investment trusts and associated ETFs.