Interest rates aren’t the dealbreaker you think

If you’ve been keeping an eye on mortgage rates, it’s easy to feel discouraged when they’re higher than you’d like. After all, a lower rate means a smaller monthly payment—so why not wait until rates come down before buying?

Here’s the thing: your first mortgage rate is not your forever rate. If rates drop after you purchase your home, you can refinance and take advantage of those lower rates in the future.

Let’s break this down.

What happens when you refinance

Refinancing is the process of replacing your current mortgage with a new one—ideally with a lower interest rate. This isn’t just for savvy investors; it’s something everyday homeowners do when market conditions change.

Here’s how it works:

1. You shop for a new loan at the lower market rate.

2. Your lender pays off your existing loan and issues you the new one.

3. Your monthly payment drops, sometimes by hundreds of dollars, and your total interest paid over the life of the loan shrinks.

You still keep your home. You just change the terms of the loan so it works better for you.

Waiting for the “perfect” rate can backfire

While you’re waiting for rates to come down, the housing market keeps moving. Prices can rise. Inventory can shrink. Competition can increase.

Let’s say you’re eyeing a $600,000 home today with a 7% interest rate. You wait a year hoping for rates to drop, but in that time prices rise by 5%. Now the same style home costs $630,000. Even if the rate has dipped to 6%, your overall payment might not be much lower—and you missed out on building equity for an entire year.

By buying sooner, you start paying down your mortgage right away and gain the flexibility to refinance later, and take advantage of a less competitive market.

Real-world refinance example

Let’s say you buy that $600,000 home today:

• Loan amount: $540,000 (10% down)

• Rate: 7% (30-year fixed)

• Monthly principal & interest: ~$3,594

Two years from now, rates drop to 5.5% and you refinance:

• New loan amount: ~$515,000 (after two years of payments)

• New rate: 5.5% (30-year fixed)

• New monthly principal & interest: ~$2,925

Savings: About $669 per month — that’s over $8,000 per year back in your pocket after refinancing.

Let's compare buying in a high-rate market and refinancing once rates drop versus waiting to buy until the rates drop:

Scenario	Purchase Price	Interest Rate	Loan Amount	Monthly P&I Payment	Equity After 2 Years
Buy Now in High-Rate Market & Refinance Later	$580,000*	7.0% → 5.5%	$522,000 → $497,000	$3,472 → $2,823	~$25,000
Wait for Lower Rate	$630,000**	6.0%	$567,000	$3,398	$0 (starting fresh)

*Assumes you negotiate a ~3% discount in a slower, high-rate market.

**Assumes a 5% price increase while waiting.

Even if remain on your original mortgage for 5 years, you could save over $200,000 over 30 years of payments:

(3,472 x 60) + (2,823 x 300) = $1,055,220

(3,398 x 360) = $1,223,280

The real power of refinancing

• It’s not permanent: Your initial mortgage rate is just the first chapter of your homeownership journey.

• You can refinance multiple times: If rates keep dropping, you can keep adjusting your loan.

• You can change loan terms: Shorten your loan term, lower your payment, or even cash out some of your equity if it makes sense for your goals.

Refinancing is like giving yourself a “do-over” when the market shifts—something you can’t do with home prices.

Refinancing costs (and why they’re worth it)

Refinancing isn’t free—it typically costs 2–5% of the loan amount in fees. But if your monthly savings are significant, you can recoup those costs quickly.

Example: If refinancing costs $6,000 but saves you $669/month, you break even in just 9 months—after that, it’s pure savings.

Equity growth starts sooner

The earlier you buy, the sooner you start building equity. Even modest appreciation can add up quickly. A 3% annual increase on a $580,000 home adds ~$17,400 in value in just one year—equity you wouldn’t have if you were still renting and waiting for a “better” rate.

How long should you plan to stay?

Refinancing makes the most sense if you plan to stay in the home long enough to benefit from the lower rate. A good rule of thumb: If you’ll live there for at least 2–3 years after refinancing, it’s often worth it.

The bottom line

High interest rates may seem like a barrier to homeownership, but they’re really just a temporary speed bump. The key is to focus on what you can control—finding the right home at the right price—and remember that you can always refinance when rates come down.

The right time to buy isn’t necessarily when rates are at their lowest; it’s when the right home is available and you’re ready to take the leap. Rates can change. Your dream home might not wait.