My husband and I have been homeowners for eight years. We bought our first home and paid an interest rate of 4.25 percent. Later, during the pandemic, we refinanced, and our interest rate dropped to 3.375 percent. However, we relocated for a job, and our new home has an interest rate of 5.57 percent. Giving up our low interest rate was painful but something we needed to do because we moved out of state. So now, we’re making plans for managing a house payment with a high interest rate.
Our Strategy to (Eventually) Escape Our High Interest Rate
We considered not buying a house in our new area and waiting for the market to cool off. However, due to inflation, we worried that mortgage interest rates would keep going up, and so far, they have. Instead, we bought a house, banking on the value to continue to increase. But we also made plans for managing a house payment with a high interest rate.
Maintain Our Credit Scores
Our credit scores are in the 800s, and we have no credit or automotive debt. We plan to maintain our high credit scores and stay free of credit card debt.
Refinance When Rates Drop
Then, when the interest rates drop, we will refinance. Keeping our credit scores high, gives us the best chance at refinancing at the lowest interest rate possible.
Plan to Pay Extra
I was shocked when I saw a closing document showing that if we paid our house payment on time for the next 30 years, we would pay double the loan amount due to the high interest rate. In other words, by the time we paid off our house, it would cost twice our loan amount.
We plan to pay off our house faster, especially since we would be senior citizens when we made the last payment if we paid it on time.
The plan is to refinance in a few years, and once we do so, we’ll continue to pay our former monthly payment. In addition, we may refinance for a shorter term, say 15 years. This might increase our monthly payment, but it will save us on interest in the long run.
Live in the Home Long-Term
We’re not sure this is our forever home, but it will be our home for the next 10 years until our kids grow up and move out. The longer we can stay in this home, the better, at least until we’re ready to downsize.
Each time you move, you lose money on closing costs and fees. Plus, when you buy a new home, you start all over again with mortgage payments that mainly pay down the interest until you get halfway through the mortgage term.
Final Thoughts
High mortgage rates make house buying difficult. Despite this, we decided to purchase our home, but we have plans for managing a house payment with a high interest rate and free ourselves from the financial burden as soon as possible.
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Melissa is a writer and virtual assistant. She earned her Master’s from Southern Illinois University, and her Bachelor’s in English from the University of Michigan. When she’s not working, you can find her homeschooling her kids, reading a good book, or cooking. She resides in New York where she loves the natural beauty of the area.