How to Make High Interest Rates Work for You
High interest rates make borrowing more expensive. Full stop.
This is not one of those articles where I try to convince you that rates are secretly great, or that you should hurry up and buy a house because someday they might go down.
But a higher-rate market can change where the expense shows up in a real estate transaction. And sometimes it creates room to improve the parts of the equation you actually have some control over.
TL;DR: High rates change the shape of the negotiation.
Here’s what that can look like.
You Don’t Live in the Purchase Price. You Live in the Payment.
The price of the house matters, obviously. But your monthly cost is being built from several things at once: the amount you borrow, your interest rate, taxes, insurance, mortgage insurance if applicable, and sometimes condo or association fees.
Two houses with the same price can have very different ownership costs.
And two buyers purchasing the same house can have very different payments.
So before we get overly attached to a price point from a housing calculator, we want to understand the actual payment.
That may mean talking to a lender earlier than you expected.
And here’s the thing: the best lender isn’t necessarily the one with the lowest rate.
Huh?
Exactly. Keep reading.
The best lender is the one who can get you to the closing table when they say they will. After that, it’s the one who knows how to tailor the mortgage to you rather than simply handing you whatever loan product is easiest to quote.
Interest rates are expensive.
Bad advice costs more.
Competition Costs Money Too
When money is cheap and everybody wants the same house, buyers often pay for that competition in other ways.
They may offer more.
Duh.
But there are costs hiding behind the sales price that we find buyers don’t always consider.
You may have less leverage around repairs. Less flexibility on timing. Less room to negotiate the expensive things that actually affect what the house costs you once you own it.
And in a competitive market, sometimes the answer really is: this is what the seller is willing to do, because somebody else is willing to take it.
Sometimes to the tune of five figures.
No, really.
A lower interest rate doesn’t automatically make that a cheaper buying environment.
And a higher interest rate doesn’t automatically make every purchase a bad one.
The question is what the whole transaction looks like.
Improvements Can Become Part of the Negotiation.
This is one of the more interesting shifts.
Say a house needs a new roof.
Instead of negotiating $20,000 off the sales price, perhaps the house stays at the stronger price and the seller puts that same $20,000 into the roof.
Same net to the seller. Very different result for the buyer.
Because a new roof may reduce the cost of insuring the property, which can reduce the buyer’s monthly payment.
No, really.
That’s why simply asking, "How low can we get the price?" can be the wrong question.
Sometimes the better question is:
Where can we use the seller’s dollars to improve the economics of owning this house?
The answer is property-specific.
That’s the point.
Time is Negotiable Too
We recently helped buyers find their dream house. During due diligence, we learned it needed to be tented for drywood termites.
In a seller’s market, the answer may have been:
Too bad, so sad. We’ve got buyers waiting.
In a more balanced market:
Okay, we’ll pay for the treatment, but you’ll have to deal with it after you move in.
In this market?
We’ll pay for it. We’ll delay closing roughly 60 days so we can have it completed before we move out. And we’ll provide the receipts.
Same treatment.
Completely different experience for the buyer.
That has value.
A Note to Sellers: Time Has Value Too
If you’re selling right now and wondering:
They loved it. Why haven’t they written?
Or:
Why are they still thinking about it?
It may be because they can.
We know. You’re not used to this.
For a long time, buyers learned that hesitation could mean losing the house. Think tonight. Write tonight. Decide before somebody else does.
Higher rates have given many buyers a luxury they haven’t had in a while:
time.
Time to run the numbers.
Time to price the insurance.
Time to think about the inspection.
Time to talk it over.
Time to sleep on it.
Time to decide whether they actually want this house, rather than whether they can beat five other people to it.
And let’s face it: if buyers are paying more to borrow the money, they deserve a silver lining.
This is one of them.
Sometimes the House Itself Can Change the Equation
This is particularly relevant in New Orleans because our housing stock gives buyers options that don’t exist everywhere.
A double.
A house with a legal apartment.
A small rear unit.
A property where part of the home can create legitimate rental income.
For some buyers, that income can materially change what ownership costs each month.
That doesn’t make being a landlord effortless, and the numbers still have to work after insurance, maintenance, vacancy and the realities of sharing property with somebody else.
But it is another reminder that price alone doesn’t tell you what a house costs to live in.
Sometimes a slightly more expensive property creates a more manageable monthly life.
Imperfection Can Create Room Too
The prettiest, easiest, most obviously desirable house generally attracts the most obvious competition.
That means there can be value in understanding things other buyers don’t want to bother understanding.
Not structural disasters.
Not buying a problem because somebody told you to “look past the paint.”
I mean houses with solvable imperfections.
An overgrown yard.
A room that’s badly presented.
A kitchen that is perfectly functional but not fashionable.
A strange layout that makes much more sense once you’ve actually walked it.
A house where substantial work has already been done, but nobody has made that work particularly easy for a buyer to understand.
Being able to distinguish an expensive problem from an unpopular but fixable problem is useful in any market.
It becomes especially useful when borrowing itself is expensive.
And Yes, the Rate Can Change Later.
Maybe.
Rates move. Refinancing exists.
But I never want a buyer purchasing a house that only works if some future refinance saves them.
You should be able to live with the payment you’re agreeing to now.
If rates fall later and refinancing improves the equation, wonderful.
That’s upside.
It should not be the rescue plan.
So How Do You Make High Interest Rates Work for You?
You don’t pretend they aren’t expensive.
You change the question.
Instead of only asking:
What rate can I get?
Or:
How low can we get the price?
We ask:
How can we alter your situation to work better for you?
Because high rates change the shape of the negotiation.
And that can be put to work for you.
Ask us how.
Celebrated for her next-level creative approach to real estate, Elisa Cool Murphy is the author of Prepped to Sell: What Works Even When the Market Doesn't. She is an award-winning, top-performing real estate broker in New Orleans and the founder and owner of Cool Murphy Real Estate.
Contact Her -
email: cool@coolmurphy.com
Facebook: @homeinneworleans
IG: @coolmurphynola
YouTube: @coolmurphynola
phone: 504-321-3194
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