Considering buying a home in St. Louis, but worried about rising mortgage rates? You’re not alone. Today’s market presents unique challenges, but there are still ways to achieve homeownership. This guide explores strategies for St. Louis homebuyers, specifically focusing on maximizing your buying power despite higher interest rates.

The Challenge: Moving Up in a Higher Rate Environment

Let’s use a real-life example. Imagine buying a home in St. Louis in 2012 with a rock-bottom interest rate of 2.75%. Fast forward to today, and you might be looking to upgrade due to growing needs or a desire for a new location. However, selling your home with a low rate often means buying a new one with a significantly higher rate (closer to 7%).

The higher rate translates to a larger monthly payment, even if your income has increased. The key is finding ways to offset the additional interest expense.

Solution 1: Leverage Home Equity for a Larger Down Payment

The good news for many St. Louis homeowners is the significant rise in home equity over the past decade. This presents an opportunity to leverage your existing home’s value for a larger down payment on your new purchase.

For instance, if your 2012 St. Louis home purchase was $400,000 with a 20% down payment, your current loan balance might be around $222,000. Assuming a $750,000 sales price, you could potentially walk away with $400,000 or more in equity.

Carlson Mortgage Can Help!

As a trusted St. Louis mortgage broker, Carlson Mortgage can help you assess your home equity and determine the best way to utilize it for your new purchase. We offer a variety of loan options and down payment assistance programs to maximize your buying power.

Solution 2: Shorten Your Loan Term with a Lump Sum Payment

While a lower monthly payment might seem appealing, consider the long-term benefits of paying off your mortgage faster. By using a portion of your sales proceeds from your existing home, you can make a significant lump sum payment towards your new mortgage.

Let’s revisit our example. Imagine a new home purchase in St. Louis for $1.2 million with a 20% down payment. The loan amount would be $960,000 with a monthly payment of roughly $6,550 at a 7.25% interest rate.

However, applying a $300,000 lump sum payment from your previous home’s sale would reduce your loan balance to around $657,000. While your monthly payment remains the same, you’d save a significant amount in total interest paid over the life of the loan (potentially over $1 million!). Additionally, your loan would be paid off in roughly 13 years instead of 30.

Carlson Mortgage: Your Partner in Strategic Mortgage Planning

At Carlson Mortgage, we understand the importance of long-term financial planning. Our experienced mortgage professionals can help you develop a strategic approach to your new home purchase, considering factors like down payment options, lump sum payments, and potential future refinancing opportunities.

Remember: Even with higher interest rates, buying a home in St. Louis can be a sound investment. By leveraging your home equity and employing strategic mortgage planning, you can achieve your dream of homeownership while minimizing the impact of rising rates.

Contact Carlson Mortgage today! Let’s discuss your unique needs and help you find the perfect mortgage solution for your St. Louis home purchase.

Ready to find your dream home? Contact Carlson Mortgage, your trusted St. Louis mortgage broker, for a free consultation. Call or text us at (314) 329-7314 or fill out our loan application at www.carlsonstl.com/apply.