Smart strategy or outdated advice?

Image by Getty Images; Illustration by Bankrate

When mortgage rates began rising in 2022, Americans responded by buying fewer homes. In an attempt to spur reluctant buyers to set aside their fears and make a move, many in the housing industry have begun using the phrase “marry the house, date the rate.”

What it means to ‘marry the house’ and ‘date the rate’

This motto became popular during the post-pandemic era of rising rates. It’s a colloquialism that contrasts the relative permanency of owning a home with the much more temporary transaction of taking out a home loan. After all, it has long been common practice for homeowners to refinance when mortgage rates fall.

Marry the house

“Marry the house” is a straightforward concept: Find the house of your dreams and live happily ever after. In this part of the buying strategy, you focus on finding a house you love. Homeownership may or may not be as enduring as an actual marriage — in the 1940s, one in five Americans moved every year, although that pace has steadily declined since the mid-1980s, according to research from the Harvard Joint Center for Housing Studies. At any rate, you don’t have to stay in the house forever, but you are making a commitment of at least a few years.

Date the rate

While you develop an emotional connection to a house, the same doesn’t apply to a mortgage. It’s just a financial instrument. The analogy to dating is somewhat apt: You can stick with your mortgage for a few months or years, but when something better comes along, you can break up with the old mortgage and move on to the new one. Luckily for borrowers, refinancing a mortgage is less awkward and heart-wrenching than dumping a romantic companion.

Is ‘marry the house, date the rate’ still good advice in today’s market?

While rates fell below 3 percent for only a brief period during the pandemic, the deals were so tantalizing that many just can’t forget the moment of super-cheap money. As a result, home sales have plunged to some of the lowest levels in years. Given that backdrop, “marry the house, date the rate” is useful advice.

A caveat: You shouldn’t bank on home values going up and mortgage rates going down. While home prices have been setting one record after another, it’s possible that they’ve entered a period of more muted appreciation. And mortgage rates are especially unpredictable. While housing economists expect mortgage rates to fall gradually, there are no guarantees.

Vishal Garg, CEO of mortgage lender Better, is a proponent of the “marry the house, date the rate” strategy.

“The first question is: Have you found a house that you love? Second, can you finance the house you love at a price that’s similar to what you pay in rent?” Garg says. “If that’s the case, you’re getting an opportunity to buy an option to refinance in the future and significantly lower your housing costs.”

The first question is: Have you found a house that you love? Second, can you finance the house you love at a price that’s similar to what you pay in rent?”

— Vishal Garg
CEO, Better.com

Garg has made “date the rate” part of his company’s strategy. Better offers reduced closing costs to homebuyers who finance a purchase with the company and then refinance with Better in the future.

That’s important because closing costs can make a refinance a bad deal. However, in some cases, you can refinance with no title insurance fee and no appraisal. “That means you can do a near-zero-cost refi,” Garg says.

In that case, even a modest reduction in mortgage rates might trigger a borrower to play the field. Say you’ve got a $400,000 loan at 7 percent, for a monthly principal and interest payment of $2,661. If rates fall to 6.25 percent, your new payment would be $2,463, or a savings of $198 a month.

If your closing costs are $4,000, you’d break even on the refinancing costs in 20 months.

When is it smart to ‘marry the house, date the rate’?

Marrying the house and dating the rate might work in your favor if:

• You can afford a home you like at today’s rates
• You expect to stay in the home for at least three to five years
• Your monthly rent is comparable to what it would cost to own a home
• You can refinance into a mortgage that carries a title insurance waiver, an appraisal waiver or other discounted closing costs

When should you avoid ‘marrying the house, dating the rate’?

On the other hand, this strategy may not be to your benefit if:

• You can’t find a home that’s in your budget and meets your needs
• You think you’ll move for work or family reasons in the next three to five years
• Your monthly rent is significantly cheaper than your monthly mortgage payment would be
• You live in a state such as Florida or New York that collects a tax on refinancing — the extra cost can push out the break-even point

Alternatives to the ‘marry the house, date the rate’ approach

Still not sure if this is the right strategy for you? Here are some different approaches you may want to consider:

• Wait for rates to fall: The major downside here is that home prices could rise while you wait, which could offset any savings you might gain by refinancing to a lower rate later on.
• Take out an adjustable-rate mortgage (ARM): These loans let you capture declines in mortgage rates without refinancing — although ARMs expose you to the risk of rates rising in the future.
• Pay for mortgage points: If you decide to go through with the home purchase, you can buy discount points from your lender at closing. These can lower your interest rate, often by 0.25% per mortgage point.