“Marry the house, date the rate” is a catchphrase that sprang up as interest rates started climbing last spring.

The proposal is simple: Buy a house at whatever mortgage rate is available with the intent to refinance and nab a lower rate later.

“‘Marrying the house’ means that you should focus more on finding the right property rather than trying to time your purchase to get the lowest interest rate,” says Adam Fuller, a senior loan officer at Mortgage 1 in Grand Rapids, MI. “‘Dating the rate’ means you are not committed to your mortgage loan for life—as long as you can refinance it down the road.”

But is this homebuying strategy right for you? Read on for all the potential pitfalls you need to know before you say “I do” to a home (and a mortgage).

1. Interest rates don’t go down

Buying a house purely on the expectation that you’ll be able to refinance when interest rates go down can be risky. This is especially true if you can’t quite afford the home in the long run at the current mortgage rate.

“‘Marry the house, date the rate’ strategy makes the most sense if the homebuyer can afford the mortgage payment as is and isn’t in a fragile financial position,” says Angela Dorsey, a certified financial planner with Dorsey Wealth Management in Torrance, CA.

After all, interest rates are a fickle beast.

“Interest rates mirror a variety of factors such as wages, inflation, and general economic conditions,” explains Fuller.

For insight into how rates rise and fall, take a look at Freddie Mac’s historical mortgage rates data.

• On May 6, 2010, the 30-year fixed rate was 5% before dropping to 3.35% on May 2, 2013.

• Rates then fell to 2.65% in January 2021—and soared to 6.48% in January 2023.

In a nutshell: The pattern of rising and falling interest rates has repeated over and over for years, depending on what’s happening in the world.

2. Thinking you can refinance whenever

Let’s say you take the plunge and marry a home you fell in love with.

Then sometime later, you notice interest rates are starting to drop. You might wonder how soon after buying your home you can begin to date the rate and refinance.

And that answer all depends on your lender and the specific terms of your mortgage.

For instance, some mortgages come with a prepayment penalty. This occurs if the lender charges fees for paying off your mortgage early, usually within the first three years of the loan.

3. Unexpected fees

If you can pay off your existing mortgage without shelling out too much, dating a new rate may not make financial sense in the big picture.

Why? Because refinancing isn’t free. And closing costs typically range from 2% to 6% of the loan amount. So you will have to figure out if the savings from the lower rate surpass the costs of refinancing.

“Reaching a break-even point can take a few years,” says Fuller.

Finally, a new loan means new terms.

“Refinancing to a new 30-year loan could mean you’ll be making mortgage payments for several more years, even if the rate’s lower and the payments are less,” explains Fuller.

Opting for a shorter term avoids extending the loan, but your monthly payments will likely increase.

4. Not letting rates drop low enough

When you’re dating the rate to lower your monthly mortgage payments, you need to figure out the magic rate that will make refinancing work in your favor.

“A common rule of thumb is when mortgage interest rates are at least 0.5% to 1% lower than your current rate,” says Fuller. However, this general guideline might not apply in every situation.

Here’s a breakdown of payments in different scenarios for a $300,000 home with a 30-year fixed-rate loan over a year.

• Possible current interest rate: 6.75% equals a $1,945 monthly payment.

• Possible lower interest rate: 4.75% equals a $1,565 monthly payment.

This homeowner who waits a year and snags a lower rate will pay $380 less monthly.

5. Refinancing isn’t a sure thing

Refinancing isn’t guaranteed for every homeowner when lower interest rates do show up. You still have to meet the basic loan requirements to qualify.

“The homebuyer may be in a cash flow situation where they may not qualify to refinance with variables outside of the homebuyer’s control such as job loss, divorce, a drop in home value, or a medical event that drops their credit score,” says Dorsey.

So before you “marry” your dream home, take a good look at your current income, monthly expenses, and long-term financial goals.

Consider buying a house you can afford with payments you can comfortably handle, regardless of being able to refinance in the future.

“Buying a home should be a step toward financial stability and wealth building, not a move that puts you on shaky financial ground,” says Fuller.

Original post courtesy of realtor.com.

Rich Dallas/Sharon Fincham

(c) 412-365-4622

(o) 724-941-3340

The Dallas-Fincham Team and Berkshire Hathaway HomeServices

Rich@DallasFinchamTeam.com

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