What if mortgage interest rates stay high? Here's what experts say buyers should do

Buying a home can be challenging these days. Home prices remain high, and interest rates are up significantly compared to a few years ago. In fact, according to Freddie Mac, the average rate on 30-year loans is now creeping toward 7%.

Will rates stay high for the foreseeable future? There's no way to tell for sure, but there are ways to get around them if they do.

Find out what today's mortgage rates are here.

What to do if mortgage interest rates stay high

If you're looking to purchase a house but high mortgage rates are holding you back, here are the strategies that might help.

Buy now, refinance later

One clear option is to buy a house now, at today's rate, and then refinance your loan when interest rates inevitably drop.

According to Robert Esposito, director of sales at RelatedISG Realty, mortgage refinancing is a particularly good option for those searching for average-priced homes, as their value will only increase in price as time goes on.

"They will encounter the most competition," Esposito says. "A property worth $500,000 today might be worth $600,000 a year from now, and then you realize you didn't save any money."

Check out current mortgage rates here to start exploring your options.

Make a larger down payment

Making a big down payment can help in two ways. First, "it could offer a lower interest rate," says Sam Sharp, executive vice president of national sales at Guaranteed Rate. 

It will also reduce your total loan balance and help you avoid private mortgage insurance, which means lower monthly payments.

"Making a large down payment lowers the total loan amount and interest rate," Esposito says." It also makes you eligible for better loan terms or even to avoid private mortgage insurance altogether."

Consider different loan options

Exploring less-common mortgage products is another option. Adjustable-rate mortgages, for example, offer lower rates than fixed ones for the first few years of the loan. These are good if you only plan to be in the home for a few years — before your rate can increase.

"Having worked with buyers in every stage of life over the years, we find that most people overestimate the amount of time they will live in a property and thus end up with a rate higher than necessary," says Lindsay Barton Barrett, a licensed associate real estate broker at Douglas Elliman. "If you can get an ARM, you can save substantially — even if you stay beyond the adjustment date. What happens is that you pay a higher mortgage rate for one year in five years versus paying a higher rate for all six years."

Getting a shorter-term loan can help, too. For example, the current average rate on 30-year loans is 6.71%, according to Freddie Mac. With 15-year loans, though, the average drops to just 6.06%. This could save you quite a bit in long-term interest. Just keep in mind that you'll have a higher payment due to the shortened pay-off timeline.

Begin comparing your loan options online today.

Stay put and improve your current home instead

If you already own a home, tapping into your equity with a home equity loan, home equity line of credit (HELOC) or cash-out refinance may be another strategy. These allow you to borrow from your home equity, which could provide funds for improving or expanding your current home as needed.

According to CoreLogic, the typical homeowner has a whopping $274,000 in home equity, so this could be a viable option for many. Still, it depends on where you live. If you're in a condo or tight urban area, for example, there may not be space to expand. 

Using your home equity also means taking on more debt, often at variable rates. These rates can be volatile, particularly as the Federal Reserve continues to fight inflation. 

"Home equity lines at a variable rate track higher interest rate numbers since they are tied to factors like benchmark rates, which are currently very high," Barrett says. 

See today's home equity rates and find out how much you may be eligible to borrow.

Buy down your rate 

Buying down your rate can work as well. In this scenario, you purchase "points" — usually for 1% of the loan amount — which reduces your interest rate by a nominal amount (typically 0.125% to 0.25%).

"In recent years, we've found it very common for buyers to buy points, which act as prepayment interest and reduce the overall interest rate on the mortgage," Esposito says. 

Some lenders also offer temporary buydowns, where a seller or lender pays to reduce a buyer's interest rate for a set period. After that, it goes back to the normal rate.

"This will allow for a credit from the seller that will pay the interest difference on a loan over the course of one to three years, resulting in a temporary rate reduction as high as 3% below the market rate," Sharp says. "This is a great way to lower the monthly payment for homebuyers."

Wait for rates to drop

Finally, you can always wait it out. As they say, "what goes up, must come down," so mortgage rates will inevitably fall at some point. The question is when.

Fannie Mae's forecast currently projects rates will finish out 2023 at an average 6.3%. The Mortgage Bankers Association predicts a bigger drop to 5.8%.

Still, these aren't guarantees. And even if rates drop, it could mean more buyers in the market, which could drive up home prices.

"If rates decrease because inflation is deemed under control, then the economy overall will be more stable and lend itself to confidence," Barrett says. "Between more purchasing power and confidence in the market, home prices would increase — meaning many will have missed the opportunity to buy real estate."

Ready to see your mortgage options? Start by viewing today's rates here.

Every situation is different

There's no clear-cut strategy for dealing with today's high mortgage interest rates. The right move for you will depend on your goals, your budget and your personal situation, so make sure to talk to a mortgage professional before deciding how to proceed.

And once you do decide to move forward, make sure to shop around for your mortgage. Freddie Mac estimates that getting at least four rate quotes can save you up to around $1,200 every year.