Over the past several months, many investors have been feeling much more confident in their investment portfolios – especially as the Dow Jones Industrial Average has hit the coveted 20,000 mark. But, while stocks and other equities may have some upward momentum of late, can this help or hinder you if you’re hoping to buy a home in the near future?
Oftentimes, when the stock market goes up, it can inversely affect interest rates. So, if the market continues to rise, it may be possible that the interest rates for mortgages will remain steady, or even go down.
The interest rate at which you are able to borrow can make a difference in the amount of your monthly payment – and when considering a 15- or a 30-year time line, even just a small difference in the amount of your monthly payment can make a substantial difference in what you spend over time.
Then there is the issue of the down payment. For some people, the bulk of their down payment funds may come from investments that they have in the stock market. So, if you are in this group, a higher stock market could mean that you’ll have a larger percentage of the purchase price to put down – which could, in turn, allow you to have a lower monthly mortgage payment.
In addition, if your down payment makes up more than 20 percent of the total purchase price of your new home, you may also be able to avoid paying the additional premium for private mortgage insurance – an insurance coverage that is typically required by lenders for home buyers who have less than 20 percent down.
Because the stock market can be a volatile place, the best time to access your funds can be dependent on a number of different factors. These can include the timing of when you plan to make a home purchase, as well as the performance of the underlying company (or companies) that you have invested in.
If you’re considering the purchase of a home and you aren’t sure of the best next step, Contact Us. We can help you to work through the numbers to ensure that you stay within your home buying budget, and from there, we will design the best plan of action for you.