In the coming months, it is clear that mortgage interest rates will rise to levels not seen for several years. While just two or three months ago a family looking to purchase a house on Long Island could obtain a mortgage with rates as low as 3%, today these rates have climbed to over 5%. This trend with continue all year because the Federal Reserve, which sets lending interest rates, is attempting to reduce inflation by increasing these interest rates.
So how does this rise in mortgage interest rates affect the market for people wanting to sell their Long Island home? The answer to this depends, in part, on whether you intend to buy another home in the area, move out of state or move into a 55 and over community here or elsewhere. One thing a seller of a home can do, especially if you don’t need the proceeds of the sale to purchase another house, is to consider giving the buyer a mortgage. This is known as a purchase money mortgage. What is a purchase money mortgage? How does this work?
Lets say you can sell your house for $500,000.00 and you don’t need the entire proceeds to purchase another house. You may want to give a mortgage to a buyer who can put down a high amount, such as $200,000.00, as a downpayment. As the process of giving such a private mortgage is less time consuming and expensive, you can charge a higher interest rate than a bank and assure a stream of income for years. So you may want to lend the balance of $300,000.00 at 6 or 7% for however number of years you and the purchaser agree. This will leave you with a nice stream of income at an interest rate far more than banks pay on their bank accounts.
This is just one of many ways to achieve a sale of your Long Island home during a period of time when interest rates are rising causing uncertainty in the market. The present real estate market requires more thought, and perhaps, knowledge before both seller and buyers make important decisions.
The experienced real estate attorneys at Glynn, Mercep, Purcell and Morrison are able to give you advice and help you make decisions that are best for you. So give us a call before you list your Long Island home for sale so you can be sure that you are making the best decisions.