Mortgage rates are climbing again. The average 30-year fixed rate recently hit 6.75%, erasing the relief buyers saw earlier this spring.
For a buyer putting 20% down on a typical $420,000 home, this means monthly principal and interest payments jump nearly $200 in just a few weeks. When rates approach 7%, the old playbook-like cash-out refinancing-backfires if it means replacing a 3% or 4% mortgage.
Here are three ways to navigate the spike.
1. Use a Second Mortgage
Home equity lines of credit (HELOCs) and home equity loans let you borrow against your property without touching your low-rate first mortgage. HELOCs work like a credit card tied to your home; you draw and pay interest only on what you use. Home equity loans offer a lump sum with fixed payments-ideal for a single large expense.
2. Reverse Mortgage for Seniors
If you're 62 or older with significant equity, a reverse mortgage allows you to access cash without monthly payments. The lender pays you, and the loan is settled when you sell or move out. This can free up cash flow, especially if you use proceeds to pay off an existing home loan.
3. Builder Buydowns for Buyers
Existing homeowners are reluctant to sell and give up their cheap mortgages. New construction offers a workaround: builders with larger profit margins often buy down your rate for the first year or two, temporarily lowering your monthly payment.