Texas Mortgage Rates – 7 Powerful Strategies and Clever Hacks You Need to Know About

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Is 14.5% a Bad Mortgage Rate (or a Good Mortgage Rate)?

If rates were 14.5%, would that mean it’s a good or bad time to buy a home?

It could be bad for the seller and great for the buyer, yes?

I bought a home many years ago at 14.5%. For me, it was a fantastic time to buy. I was renting and wanted a house, and the price was right.

After buying another house (at 8%), I refinanced it several times and turned it into a rental/income property, which ended up profitable.

Lived in that new house for a few years and refinanced it twice.
Then I turned it into a corporate rental after I purchased another home (that I wish I still owned!)….that one at 7%.

Sold that home a few years later at a much higher price after mortgage rates dropped and the location (Memorial) got super-hot.
Since then, its value has quadrupled.

The land value was insane. And now it’s ridiculously and stratospherically insane.

Buying a great house in a solid location was my profit-making secret to those purchases (multiple times). High rates eliminated most of the competing buyers and stabilized the prices.

A rate can be refinanced, and the loan can be paid off. Am more interested in pricing than rates. Closer to (or less than) the local median, the better.

The higher rate got me a lower purchase price. And then, when rates fell, both the values and the rental rates increased, My costs went down by refinancing while the properties soared in value.

If it weren’t for high rates at the time, none of those transactions would have happened, and they ended up among the most profitable.

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Mortgage Rate Data from 1972 to 2023

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Houston, Texas Mortgage Rates Now

Houston Mortgage Rates (in a Houston frame of mind today) have risen over the past 12 months from 3.85% to a high recently of 7.08%, according to the Primary Mortgage Market Survey-Freddie Mac.

The Freddie Mac survey indicates the average rate on 3/02/2023 was 6.65% for a 30yr fixed rate loan. A 15yr fixed rate loan in their study shows 5.89%

The chart indicates that current rates aren’t unusual over the long term.
The chart also shows the jolt higher over the past year.

The chart’s longer-term trend implies that within some period (The FED seems to be indicating during 2024), rates will return to trend when they hit their inflation target (net of housing costs).

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Fed Inflation Target is 2%, according to Jay Powell, Chairman Federal Reserve

The Fed’s inflation target is 2%. Lately, a few hints that it might ratchet up to 3% have been implied, but assume they’re serious about 2% (at least until unemployment jumps).

Next question:
Assume they hit their target of 2% (net of housing). Will rates drop?

And if the answer is “yes,” what will happen to property values when rates drop?

Will more people be looking to buy a house with a lower rate?

Since that’s been the pattern in the past, there’s nothing to suggest it won’t happen again.

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First-Time Buyers Stuck in Over-Priced Apartments with Non-Responsive Management Companies

The backlog of prospective younger, first-time buyers paying insanely high rents to non-responsive owners and management companies ensures it.

I witnessed this first-hand when I experienced the trauma of helping my son with his lease in Florida last year.

I wouldn’t have believed it if I had not experienced it for myself (interactions with the management company). And the rents were higher than mortgage payments.

It finally resolved, but it made me realize how large the “first-time buyers” universe will be over the next few years as they leave those high-priced “luxury” apartment projects in droves.

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Who’s Refinancing at Current Texas Mortgage Rates?

Here are some comments I’ve heard in refinance discussions during this period of high rates

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Mortgage Refinancing Now for a Specific Benefit

• Cashout Refinance to consolidate debts such as 1) high balance credit cards, 2) auto loans, 3) student loans
• Cashout Refinance to repair/renovate a property
• Cashout Refinance to raise down payment and repair funds to purchase another home
• Refinance to complete a divorce.

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Who’s Buying at Current Mortgage Rates?

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Hedging Your Mortgage with US Treasuries

Arbitrage with US Treasury bonds:

• Instead of paying cash for the home, get a mortgage and park the cash in US Treasuries.
• US Treasury yields are bumping up to 5%…put down 20% to avoid MI (mortgage insurance) and a mortgage for the rest.
• His logic is that If the Fed reduces rates next year (as many are betting on based on recession risk), bonds could increase in price. And if mortgage rates decline, the house could be refinanced at a lower right while home value could also go up increase,
• And, he sees little risk because if rates don’t drop, he can redeem the bond (a 2yr or 3yr UST) and pay off the mortgage.

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Been Looking for Years, and None of My Offers Were Accepted Because Others Offered More Than The Asking Price. Now I Have a Much Better Chance

I hear this one the most:

• “I’ve been trying to buy a house for 2yrs, and they’re often sold before I can even make an offer, it was very frustrating”
• “I offered more than the asking price and still didn’t get it”
• “Seeing more choices now than I did before”
• “Am OK with the higher rate to get the house…sooner or later rates will drop again, and it’ll all work out, and meanwhile, now I’ll offer less”

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Because of “The Math,” I can lower the price to match the higher payment amounts.

“Just build the cost into the price.”

• “Rates are 2% or so higher than they should be.”
• “2% costs me $6000/yr, so I’ll offer $12,000 (2yrs at $6,000/yr) less in my offer to compensate me for the higher rate”

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Because of “The Math,” I’ll make Pre-Payments and Receive Compound Interest

“Prepayment Compound Interest (and Airbnb)

• “I don’t care about the rate because I’ll make prepayments”
• (client paid 7 figures for a 2nd home) “I don’t care about the rate because I want the house…rate isn’t a factor”
• “In a year or so, I’ll start renting the house on Airbnb for 2 weeks/month; that’ll be enough to pay the mortgage payment (the house is on a famous lake)”
• “I get large bonuses every year and will use those to pay down the mortgage. With the prepayments and the high rate, it’s like paying myself a high rate due to compound interest (an accountant). When you do “the math,” the actual effective rate is much lower this way.”

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“Is What It Is”

• “I don’t care; it’s part of the divorce decree. My ex pays it, and you can charge even more if you want to”

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“Waiting for Lower Rates”

• “Out of the market until rates go down”

When I ask, “what will happen to home prices and supply when rates go down? ?”

• Answer: “Crickets”

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Sometimes it Can be Necessary to Buy or Refinance when Rates are High.
Sometimes it Isn’t.

Contact Steve Silver at Silver Mortgage, 1-800-920-5720, for more information about mortgage escrow accounts in Texas or Florida.

© 2023 SteveSilverNow

Notes to Reader:

1) Prepayment also allows a 30yr loan to be paid as a 15yr (instead of taking a 15yr loan). The reason that’s a benefit relates to how “debt to income” is calculated…more borrowing power due to lower monthly payments on your credit report. This strategy can dramatically lower your debt-to-income ratio and that can be a rate benefit with the new LLPA adjustments.