What Higher Mortgage Rates Mean for Home Sellers

With the new tax code and shifts in the economy occurring, some experts are predicting an increase in mortgage interest rates during the coming year. While much of the conversation focuses on how higher rates would impact buyers, what about the sellers? Here are a couple of ways those higher rates could make a difference for everyone involved.

When a homeowner has decided to call a real estate professional and say "Sell my house now!", incrementally rising interest rates could actually work in the seller's favor. Assuming the buyer believes that the rates will continue to increase over the next year or so, waiting could mean paying thousands of additional dollars over the life of a mortgage. Choosing to buy now means locking in a fixed rate and not having to worry about further increases. Even if the buyer goes with a variable rate mortgage with a fixed term of 7-10 years, there is always the possibility of converting it to a fixed mortgage before the term is up.

For the seller, the urgency that buyers feel to act now could mean the property is purchased now instead of remaining on the market for months. Since there is a desire to buy immediately, the chances of receiving the full asking price are much higher. In other words, those increasing mortgage rates may be all the motivation a buyer needs to go ahead and finance a home purchase now rather than waiting for six months.

While higher rates could mean qualified buyers move quickly to secure financing and lock in the lowest possible rate, a trend of increasing interest rates could push some potential buyers out of the race. The issue tracks back to one of the factors that lenders look at closely; the debt to income ratio.

Lenders want a reasonable assurance that debtors will make timely payments on those mortgages. It's not just about how much they earn each month. It's about how much of their income can reasonably go to making the mortgage payment. If the interest rate increases the amount of the monthly payment by as little as $50.00 a month, that change could be just enough for lenders to feel approving the application is too risky.

In this scenario, the seller may end up with a smaller pool of potential buyers. Depending on the location of the property, the asking price, and what similar homes are selling for in the local market, an upswing in interest rates could mean the house is on the market for weeks or months before a buyer with an excellent debt to income ratio expresses interest.

Before you call an agency and tell them "Sell my house!", take a good look at the current market trends and how they relate to residential properties. Talk with a professional about what to expect in terms of setting an asking price and entertaining offers. That information will help you decide if now is the time to place the home on the market, or if you should wait.

To sell your house fast I would suggest contacting a We Buy Houses company like ExpertHomeOffers.com. They will connect you with a local home buyer your your area at no cost!