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Debt can be both beneficial and harmful. It can help you buy a home, pursue higher education, or start a business. However, excessive debt can lead to financial stress and mental health issues like depression and anxiety. This article will help you distinguish between good and bad debt to make informed financial decisions.

Key Takeaways

  • Good debt helps improve your financial future by investing in appreciating assets or enhancing your earning potential, such as through education, real estate, or starting a business.
  • Bad debt finances depreciating assets or unnecessary luxuries, such as cars, clothes, and other consumer goods, leading to financial strain due to high-interest rates and reduced value over time.
  • Some debts fall into a gray area and can be beneficial or detrimental depending on how they are managed, such as consolidating high-interest debt into a lower-interest loan or borrowing to invest with calculated risk.

Good Debt vs. Bad Debt

Good debt typically involves borrowing for investments that grow in value or generate income over time, like education or real estate. Bad debt usually involves borrowing for depreciating assets or unnecessary expenses, like luxury items or cars. However, accumulating too much debt, even if it starts as good debt, can become a problem if your monthly debt payments become unmanageable.

Isn’t all debt bad?

Not all debt is bad. Debt becomes problematic when it’s unnecessary or avoidable. The mindset of trying to ‘keep up with the Joneses’ or believing ‘only the best will do’ can lead to unwise borrowing.

However, some types of debt can provide significant benefits, such as financing a home or investing in education. These types of debt can offer a good return on investment and help you improve your financial situation. It’s crucial to understand the difference between beneficial and harmful debt.

What is good debt?

Good debt is debt that helps you make money or have a home to live in. It could be beneficial In a literal sense (a return on investment) or figuratively (enhancing your skills and earning potential). Either way, good debt allows you to invest in yourself and your future.

Here are a few examples of good debt.

Education

Investing in your education is a strategic move that can enhance your future success. By gaining knowledge and skills, you increase your chances of securing better jobs and advancing in your career.

Many people experience a return on their educational investment within a few years, though this varies by industry. Before committing to a college or secondary education, thoroughly research the field you wish to enter. Consider average salaries, potential for career advancement, and typical career ceilings.

The value of student loan debt hinges on the earning potential associated with the degree you pursue. Make informed decisions to ensure your educational investment pays off.

Starting a Business

It takes money to make money, and starting a business is a prime example of this principle. Most businesses require an initial investment, and often it’s substantial. You can use a loan to launch your business and facilitate its growth.

Starting a business involves risks, just like any other investment. Conduct thorough research on your industry to understand what strategies have succeeded or failed for others. Evaluate the risks and decide if taking out a loan is a wise choice for your situation.

Be cautious of high-interest loans, such as payday loans or unsecured personal loans, as they can lead to financial strain due to their high repayment costs. It’s important to know how much you’re borrowing. Loans come with an annual percentage rate (APR), which represents the interest rate as a percentage of the principal amount borrowed. This rate determines how much you will pay for the borrowed money over time.

Real Estate

A great example of good debt vs. bad debt is real estate because you’ll see a return on your investment directly. Borrowing money to invest in real estate earns you equity in the property. Equity is the difference between the property’s value and how much you owe in debt.

Typically, real estate appreciates, but there’s always the risk of losing value, such as what occurred during the 2008 housing crisis. As long as you pay down your mortgage as planned or even ahead of schedule, you’ll build equity faster.

Investing in real estate can be for personal use, such as a primary residence, or for investment purposes, such as commercial or rental properties.

Like any investment, do your research and make sure you’re making a good choice before taking on real estate debt. Investing in an area where the property values don’t appreciate or buying a rental home in an area that isn’t rented often can lead to bad real estate debt.

What is bad debt?

People tend to assume that all debt is bad, but bad debt specifically refers to debt used to finance depreciating assets. Unlike investments in appreciating assets, this type of debt involves spending on items that lose value over time.

Here are a few examples of bad debt:

Cars

You need a car to get from Point A to Point B. That’s a given. However, you don’t need a luxury car or a car you can’t afford to pay for without financing. It’s best to pay cash for a car if you can because it’s a depreciating asset.

When you borrow money to buy a car, you pay interest on the loan and lose money on the value of the car. Most cars lose 20% of their value during the first year after you drive them off the lot.

When you don’t have the money to buy a car outright or your money isn’t enough to buy a reliable car, look for the best financing terms. Many manufacturers offer low interest rates or 0% APR for borrowers with great credit.

If you anticipate buying a car soon, it’s time to work on your credit before taking out a car loan to get the best deal. Auto loans require you to factor in different things before taking them.

Clothes and Other Necessities

Buying clothes is a necessity, but borrowing money for them is not advisable. Clothes often have inflated prices and do not increase in value, meaning you pay more than their actual worth. Consider shopping at overstock sales or second-hand stores, where items are often much cheaper than in retail stores.

Borrowing money for everyday expenses like food, household goods, and other consumer items is also not a wise financial decision. Using a credit card for convenience is fine, but it’s important to pay off the balance in full each month. Failing to do so can lead to accumulating high-interest debt, making it difficult to escape the debt cycle.

Luxury

You should not borrow money to purchase luxury items. Why not? Just look at the name—luxury. You don’t ‘need’ these items, but you buy them anyway.

There’s nothing wrong with spoiling yourself occasionally, but not at the expense of your future. Rather than racking up credit card debt to buy luxurious items, determine what you want and save for it. Set a timeline and divide the amount you’ll need by the number of months until you potentially buy it. Save that amount of money each month, and you should reach your goal within your desired timeline.

Yes, this requires a great deal of patience. But, when you purchase luxury items with debt, you rack up interest charges and end up paying much more for them than they’re worth.

What debts fall in the gray area?

Some debts don’t fit neatly into ‘good’ or ‘bad’ categories and depend on the circumstances. Here are a couple of examples.

Borrowing to Pay Off Debt

Paying off high-interest credit card debt with a low-interest loan can be a good idea, but here’s when it becomes a bad debt. If you consolidate your debt into a 0% or low-interest rate loan but do not allocate the “extra” money saved towards your debt, you’ll end up in the same situation.

The key is to pay the same amount of money to the debt but with a lower set monthly payment and interest rate. More of your payment will go towards the loan’s principal, paying it down faster. This means you’ll pay less interest over the life of the loan and have more money in your pocket in the future.

If you continue to make the minimum payments using your “saved” money, then it’s a bad debt, as it won’t benefit you.

Borrowing to Invest

Investing on margin may be possible for experienced investors with the right credentials. While leveraging in this way can be profitable, it’s not guaranteed. If the investment fails, you’ll lose more than you borrowed, resulting in significant debt.

However, if your investment performs well and generates profit after repaying the margin, then borrowing to invest can be considered a successful financial strategy.

Final Thoughts

Recognize the difference between good and bad debt. Use debt wisely by investing in appreciating assets, making timely payments, and avoiding high-interest loans. Develop a financial plan to manage debt and achieve your goals.

Managing debt wisely is essential for financial success. Prioritize timely payments, avoid high-interest loans, and focus on investments that enhance your financial health. By understanding and differentiating between good and bad debt, you can make informed decisions and achieve your financial goals.

Frequently Asked Questions

How can I determine if my education loan is good debt?

Education loans can be considered good debt if they lead to a degree or certification that significantly enhances your earning potential. Before taking out a loan, research the average salaries in your chosen field and the employment rates for graduates. If the potential income increase outweighs the cost of the loan, it can be considered good debt.

Are there any strategies for managing bad debt?

Yes, there are several strategies to manage bad debt. These include creating a budget to track and limit spending, consolidating high-interest debts into a lower-interest loan, prioritizing paying off high-interest debt first, and avoiding accumulating additional debt by making smarter spending choices.

What are some warning signs that my debt is becoming unmanageable?

Warning signs that debt is becoming unmanageable include missing payments, using one credit card to pay off another, maxing out credit cards, being unable to save money, and experiencing stress or anxiety about finances. If you notice these signs, it might be time to seek financial advice or consider debt counseling.

Can consolidating debt improve my credit score?

Consolidating debt can improve your credit score if it helps you make timely payments and reduces your overall credit utilization ratio. However, it’s essential to avoid accumulating new debt and to use the consolidation loan responsibly by sticking to a repayment plan.

Is it ever a good idea to borrow money for luxury items?

Borrowing money for luxury items is generally not advisable as it leads to bad debt. Luxury items do not appreciate in value and often result in high-interest payments if financed through credit cards or loans. It’s better to save up for luxury purchases and pay in cash to avoid unnecessary debt and interest charges.

How can I ensure that borrowing to start a business is good debt?

To ensure that borrowing to start a business is good debt, conduct thorough market research, create a detailed business plan, and have a clear understanding of your industry. Assess the potential return on investment and ensure that you can make loan payments without compromising your financial stability. Consider seeking advice from financial advisors or mentors in your industry.

What steps can I take to avoid falling into bad debt?

To avoid falling into bad debt, create and stick to a budget, live within your means, save for purchases instead of using credit, and avoid high-interest loans. Additionally, focus on building an emergency fund to cover unexpected expenses and regularly review your financial situation to make adjustments as needed.

Source: crediful.com

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With REIT investing, you gain access to income-producing properties without having to own those properties outright. REITs may own several different kinds of properties (e.g. commercial, residential, storage) or focus on just one or two market segments.

Real estate investment trusts or REITs can be a great addition to a portfolio if you’re hoping to diversify. REIT investing might appeal to experienced investors as well as beginners who are looking to move beyond stocks and bonds.

Key Points

•   REITs provide a way to invest in income-producing real estate without owning the properties directly.

•   REITs must distribute at least 90% of taxable income to shareholders as dividends.

•   Types of REITs include equity, mortgage, and hybrid, each with different investment focuses.

•   Investing in REITs can be done through shares, mutual funds, or ETFs, available via brokerages.

•   Benefits of REITs include potential for high dividends and portfolio diversification, while risks involve liquidity and sensitivity to interest rates.

What Is a REIT?

A REIT is a trust that owns different types of properties that generate income. REITs are considered a type of alternative investment, because they don’t move in sync with traditional stock and bond investments.

Some of the options you might find in a REIT can include:

•   Apartment buildings

•   Shopping malls or retail centers

•   Warehouses

•   Self-storage units

•   Office buildings

•   Hotels

•   Healthcare facilities

REITS may focus on a particular geographic area or property market, or only invest in properties that meet a minimum value threshold.

A REIT may be publicly traded, meaning you can buy or sell shares on an exchange the same as you would a stock. They can also be non-traded, or private. Publicly traded and non-traded REITs are required to register with the Securities and Exchange Commission (SEC), but non-traded REITs aren’t available on public stock exchanges.

Private REITs aren’t required to register with the SEC. Most anyone can invest in public REITs while private REITs are typically the domain of high-net-worth or wealthy investors.

Alternative investments,
now for the rest of us.

Start trading funds that include commodities, private credit, real estate, venture capital, and more.

How Do REITs Work?

With REIT investing individuals gain access to various types of real estate indirectly. The REIT owns and maintains the property, collecting rental income (or mortgage interest).

Investors can buy shares in the REIT, which then pays out a portion of the collected income to them as dividends.

To sum it up: REITs let investors reap the benefits of real estate investing without having to buy property themselves.

REIT Qualifications

Certain guidelines must be met for an entity to qualify as a REIT. The majority of assets must be connected to real estate investment. At least 90% of taxable income must be distributed to shareholders annually as dividend payouts.

Additionally, the REIT must:

•   Be organized in a way that would make it taxable as a corporation if not for its REIT status

•   Have a board of trustees or directors who oversee its management

•   Have shares that are fully transferable

•   Have at least 100 shareholders after its first 100 as a REIT

•   Allow no more than 50% of its shares to be held by five or fewer individuals during the last half of the taxable year

•   Invest at least 75% of assets in real estate and cash

•   Generate at least 75% of its gross income from real estate, including rents and mortgage interest

Following these rules allows REITs to avoid having to pay corporate tax. That benefits the REIT but it also creates a secondary boon for investors, since the REIT may be better positioned to grow and pay out larger dividends over time.

Types of REITs

The SEC classifies three categories of REITs: equity, mortgage, and hybrid. Each type of REIT may be publicly traded, non-traded, or private. Here’s a quick comparison of each one.

•   Equity REITs own properties that produce income. For example, an equity REIT might own several office buildings with units leased to multiple tenants. Those buildings generate income through the rent the tenants pay to the REIT.

•   Mortgage REITs don’t own property. Instead, they generate income from the interest on mortgages and mortgage-backed securities. The main thing to know about mortgage REITs is that they can potentially produce higher yields for investors, but they can also be riskier investments.

•   Hybrid REITs own income-producing properties as well as commercial mortgages. So you get the best (and potentially, the worst) of both worlds in a single investment vehicle.

Aside from these classifications, REITs can also be viewed in terms of the types of property they invest in. For example, there are storage-unit REITs, office building REITs, retail REITs, healthcare REITS, and more.

Some REITs specialize in owning land instead of property. For example, you might be able to own a stake in timberland or farmland through a real estate investment trust.

How Do REITs Make Money?

REITs make money from the income of the underlying properties they own. Again, those income sources can include:

•   Rental income

•   Interest from mortgages

•   Sale of properties

As far as how much money a REIT can generate, it depends on a mix of factors, including the size of the REIT’s portfolio, its investment strategy, and overall economic conditions.

Reviewing the prospectus of any REIT you’re considering investing in can give you a better idea of how it operates. One thing to keep in mind with REITs or any other type of investment is that past performance is not an indicator of future returns.

How to Invest in REITs

There are a few ways to invest in REITs if you’re interested in adding them to your portfolio. You can find them offered through brokerages and it’s easy to open a trading account if you don’t have one yet.

REIT Shares

The first option for investing in REITs is to buy shares on an exchange. You can browse the list of REITs available through your brokerage, decide how many shares you want to buy, and execute the trade. When comparing REITs, consider what it owns, the potential risks, and how much you’ll need to invest initially.

You might buy shares of just one REIT or several. If you’re buying multiple REITs that each hold a variety of property types, it’s a good idea to review them carefully. Otherwise, you could end up increasing your risk if you’re overexposed to a particular property sector.

REIT Funds

REIT mutual funds allow you to own a collection or basket of investments in a single vehicle. Buying a mutual fund focused on REITs may be preferable if you’d like to diversify with multiple property types.

When researching REIT funds, consider the underlying property investments and also check the expense ratio. The expense ratio represents the annual cost of owning the fund. The lower this fee is, the more of your investment returns you get to keep.

Again, you can find REIT mutual funds offered through a brokerage. It’s also possible to buy them through a 401(k) or similar workplace retirement plan if they’re on your plan’s list of approved investments.

REIT ETFs

A REIT exchange-traded fund (or ETF) combines features of stocks and mutual funds. An ETF can hold multiple real estate investments while trading on an exchange like a stock.

REIT ETFs may be attractive if you’re looking for an easy way to diversify, or more flexibility when it comes to trading.

In general, ETFs can be more tax-efficient than traditional mutual funds since they have lower turnover. They may also have lower expense ratios.

Benefits and Risks of REITs

Are REITs right for every investor? Not necessarily, and it’s important to consider where they might fit into your portfolio before investing. Weighing the pros and cons can help you decide if REITs make sense for you.

Benefits of REITs

•   Dividends. REITs are required to pay out dividends to shareholders, which can mean a steady stream of income for you should you decide to invest. Some REITs have earned a reputation for paying out dividends well above what even the best dividend stocks have to offer.

•   Diversification. Diversifying your portfolio is helpful for managing risk, and REITs can make that easier to do if you’re specifically interested in property investments. You can get access to dozens of properties or perhaps even more, inside a single investment vehicle.

•   Hands-off investing. Managing actual rental properties yourself can be a headache. Investing in REITs lets you reap some of the benefits of property ownership without all the stress or added responsibility.

•   Market insulation. Real estate generally has a low correlation with stocks. If the market gets bumpy and volatility picks up, REITs can help to smooth the ride a bit until things calm down again.

💡 Quick Tip: It’s smart to invest in a range of assets so that you’re not overly reliant on any one company or market to do well. For example, by investing in different sectors you can add diversification to your portfolio, which may help mitigate some risk factors over time.

Risks of REITs

•   Liquidity challenges. Buying REIT shares may be easy enough, but selling them can be a different matter. You may need to plan to hold on to your shares for a longer period than you’re used to or run into difficulties when trying to trade shares on an exchange.

•   Taxation. REIT investors must pay taxes on the dividends they receive, which are treated as nonqualified for IRS purposes. For that reason, it might make sense to keep REIT investments inside a tax-advantaged IRA to minimize your liability.

•   Interest rate sensitivity. When interest rates rise, that can cause REIT prices to drop. That can make them easier to buy if the entry point is lower, but it can make financing new properties more expensive or lower the value of the investments the REIT owns.

•   Debt. REITs tend to carry a lot of debt, which isn’t unusual. It can become a problem, however, if the REIT can no longer afford to service the debt. That can lead to dividend cuts, making them less attractive to investors.

The Takeaway

REITs can open the door to real estate investment for people who aren’t inclined to go all-in on property ownership. REITs can focus on a single sector, like storage units or retail properties, or a mix. If you’re new to REITs, it’s helpful to research the basics of how they work before diving into the specifics of a particular investment.

Ready to expand your portfolio’s growth potential? Alternative investments, traditionally available to high-net-worth individuals, are accessible to everyday investors on SoFi’s easy-to-use platform. Investments in commodities, real estate, venture capital, and more are now within reach. Alternative investments can be high risk, so it’s important to consider your portfolio goals and risk tolerance to determine if they’re right for you.

Invest in alts to take your portfolio beyond stocks and bonds.

FAQ

How do I buy a REIT?

You can buy shares of a REIT through a broker if it’s publicly traded on an exchange. If you’re trying to buy shares of a private REIT, you can still go through a broker, but you’ll need to find one that’s participating in the offering. Keep in mind that regardless of how you buy a REIT, you’ll need to meet minimum investment requirements to purchase shares.

Can I invest $1,000 in a REIT?

It’s possible to find REITs that allow you to invest with as little as $1,000 and some may have a minimum investment that’s even lower. Keep in mind, however, that private or non-traded REITs may require much larger minimum investments of $10,000 or even $50,000 to buy in.

Can I sell my REIT any time?

If you own shares in a public REIT you can trade them at any time, the same way you could a stock. If you own a private REIT, however, you’ll typically need to wait for a redemption period to sell your shares. Redemption events may occur quarterly or annually and you may pay a redemption fee to sell your shares.

What is the average return on REITs?

The 10-year annualized return for the S&P 500 United States REIT index, which tracks the performance of U.S. REITs, was 2.34%. Like any sector, however, REITs have performed better and worse over time. Also, the performance of different types of REITs (self-storage, strip malls, healthcare, apartments, etc.) can vary widely.

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An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. This and other important information are contained in the Fund’s prospectus. For a current prospectus, please click the Prospectus link on the Fund’s respective page. The prospectus should be read carefully prior to investing.
Alternative investments, including funds that invest in alternative investments, are risky and may not be suitable for all investors. Alternative investments often employ leveraging and other speculative practices that increase an investor’s risk of loss to include complete loss of investment, often charge high fees, and can be highly illiquid and volatile. Alternative investments may lack diversification, involve complex tax structures and have delays in reporting important tax information. Registered and unregistered alternative investments are not subject to the same regulatory requirements as mutual funds.
Please note that Interval Funds are illiquid instruments, hence the ability to trade on your timeline may be restricted. Investors should review the fee schedule for Interval Funds via the prospectus.


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Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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SoFi Invest may waive all, or part of any of these fees, permanently or for a period of time, at its sole discretion for any reason. Fees are subject to change at any time. The current fee schedule will always be available in your Account Documents section of SoFi Invest.

Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Shares of ETFs must be bought and sold at market price, which can vary significantly from the Fund’s net asset value (NAV). Investment returns are subject to market volatility and shares may be worth more or less their original value when redeemed. The diversification of an ETF will not protect against loss. An ETF may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.

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The average 30-year fixed mortgage interest rate is 7.13% today, down -0.05% over the last week. The average rate for a 15-year fixed mortgage is 6.57%, which is an increase of 0.03% compared to a week ago. For a look at mortgage rate movement, see the chart below.

Because inflation data hasn’t been improving, the Federal Reserve has been postponing rate cuts. Though mortgage rates could still go down later in the year, housing market predictions change regularly in response to economic data, geopolitical events and more.

Today’s average mortgage rates


Today’s average mortgage rates on May. 17, 2024, compared with one week ago. We use rate data collected by Bankrate as reported by lenders across the US.

Mortgage rates change every day. Experts recommend shopping around to make sure you’re getting the lowest rate. By entering your information below, you can get a custom quote from one of CNET’s partner lenders.

About these rates: Like CNET, Bankrate is owned by Red Ventures. This tool features partner rates from lenders that you can use when comparing multiple mortgage rates.

Which mortgage term and type should I pick?

Each mortgage has a loan term, or payment schedule. The most common mortgage terms are 15 and 30 years, although 10-, 20- and 40-year mortgages also exist. With a fixed-rate mortgage, the interest rate is set for the duration of the loan, offering stability. With an adjustable-rate mortgage, the interest rate is only fixed for a certain amount of time (commonly five, seven or 10 years), after which the rate adjusts annually based on the market. Fixed-rate mortgages are a better option if you plan to live in a home in the long term, but adjustable-rate mortgages may offer lower interest rates upfront.

30-year fixed-rate mortgages

The 30-year fixed-mortgage rate average is 7.13% today. A 30-year fixed mortgage is the most common loan term. It will often have a higher interest rate than a 15-year mortgage, but you’ll have a lower monthly payment.

15-year fixed-rate mortgages

Today, the average rate for a 15-year, fixed mortgage is 6.57%. Though you’ll have a bigger monthly payment than a 30-year fixed mortgage, a 15-year loan usually comes with a lower interest rate, allowing you to pay less interest in the long run and pay off your mortgage sooner.

5/1 adjustable-rate mortgages

A 5/1 adjustable-rate mortgage has an average rate of 6.58% today. You’ll typically get a lower introductory interest rate with a 5/1 ARM in the first five years of the mortgage. But you could pay more after that period, depending on how the rate adjusts annually. If you plan to sell or refinance your house within five years, an ARM could be a good option.

What’s behind today’s high mortgage rates?

Over the last few years, high inflation and the Federal Reserve’s aggressive interest rate hikes pushed up mortgage rates from their record lows around the pandemic. Since last summer, the Fed has consistently kept the federal funds rate at 5.25% to 5.5%. Though the central bank doesn’t directly set the rates for mortgages, a high federal funds rate makes borrowing more expensive, including for home loans.

Mortgage rates change daily, but average rates have been moving between 6.5% and 7.5% since late last fall. Today’s homebuyers have less room in their budget to afford the cost of a home due to elevated mortgage rates and steep home prices. Limited housing inventory and low wage growth are also contributing to the affordability crisis and keeping mortgage demand down.

Will mortgage rates drop this year?

Most housing market experts predict rates will end the year between 6% and 6.5%. Ultimately, a more affordable mortgage market will depend on how quickly the Fed begins cutting interest rates. The central bank could start lowering interest rates in the fall, but it will depend on how the economy fares in the coming months.

Mortgage rates fluctuate for many reasons: supply, demand, inflation, monetary policy, jobs data and market expectations. Homebuyers won’t see lower rates overnight, and it’s unlikely there will ever be a return to the 2-3% mortgage rates we saw between 2000 and early 2022.

“We are expecting mortgage rates to fall to around 6.5% by the end of this year, but there’s still a lot of volatility I think we might see,” said Daryl Fairweather, chief economist at Redfin.

Every month brings a new set of inflation and labor data that can influence the direction of mortgage rates, said Odeta Kushi, deputy chief economist at First American Financial Corporation. “Ongoing inflation deceleration, a slowing economy and even geopolitical uncertainty can contribute to lower mortgage rates. On the other hand, data that signals upside risk to inflation may result in higher rates,” Kushi said.

Here’s a look at where some major housing authorities expect average mortgage rates to land.

Calculate your monthly mortgage payment

Getting a mortgage should always depend on your financial situation and long-term goals. The most important thing is to make a budget and try to stay within your means. CNET’s mortgage calculator below can help homebuyers prepare for monthly mortgage payments.

How can I find the best mortgage rates?

Though mortgage rates and home prices are high, the housing market won’t be unaffordable forever. It’s always a good time to save for a down payment and improve your credit score to help you secure a competitive mortgage rate when the time is right.

  1. Save for a bigger down payment: Though a 20% down payment isn’t required, a larger upfront payment means taking out a smaller mortgage, which will help you save in interest.
  2. Boost your credit score: You can qualify for a conventional mortgage with a 620 credit score, but a higher score of at least 740 will get you better rates.
  3. Pay off debt: Experts recommend a debt-to-income ratio of 36% or less to help you qualify for the best rates. Not carrying other debt will put you in a better position to handle your monthly payments.
  4. Research loans and assistance: Government-sponsored loans have more flexible borrowing requirements than conventional loans. Some government-sponsored or private programs can also help with your down payment and closing costs.
  5. Shop around for lenders: Researching and comparing multiple loan offers from different lenders can help you secure the lowest mortgage rate for your situation.

Source: cnet.com

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Nestled along the picturesque Connecticut River, Holyoke, MA boasts a rich industrial history and easy access to the great outdoors. With its stunning Victorian architecture, vibrant downtown area, and an abundance of green spaces, Holyoke offers a unique blend of urban amenities and small-town charm. Residents here enjoy a close-knit community, diverse dining options, and easy access to outdoor recreational activities. Whether you’re looking for an apartment in Holyoke or a spacious house to rent, there’s a place for everyone here.

In this Apartment Guide article, we’ll cut to the chase, breaking down the pros and cons of moving to Holyoke. Let’s get started and see what awaits in this gem of a city.

Pro: Affordable cost of living

One of the major advantages of living in Holyoke is its affordable cost of living. The city offers reasonably priced housing options, making it an attractive destination for individuals and families looking to settle down without breaking the bank. The average rent for a 2 bedroom apartment is $734. This is much lower than the national average rent of $1,987. Additionally, the overall cost of goods and services in Holyoke is relatively lower compared to other cities in Massachusetts, allowing residents to enjoy a comfortable lifestyle without the financial strain.

Con: Limited job opportunities

One of the challenges of living in Holyoke is the limited job opportunities available within the city. While the area has a strong industrial history, the job market may not offer as many diverse career options compared to larger metropolitan areas. Major employers in Holyoke include the colleges and universities in the area as well as the Holyoke Medical Center. Residents may need to commute to neighboring cities for employment opportunities, which can impact work-life balance and daily routines.

Pro: Access to outdoor recreation

Residents of Holyoke have easy access to outdoor recreational opportunities. The city is situated near the scenic Mount Tom State Reservation, offering hiking trails, picnic areas, and stunning views of the Connecticut River Valley. The nearby Holyoke Range State Park provides additional opportunities for outdoor enthusiasts to engage in activities such as mountain biking, birdwatching, and nature exploration. The abundance of green spaces and natural beauty enhances the quality of life for residents.

Con: Harsh winters

Holyoke experiences harsh winters, with cold temperatures and significant snowfall during the winter months. On average, the city gets more than 4 feet of snow annually. The inclement weather conditions can pose challenges for residents, including snow removal, icy roadways, and seasonal maintenance. While the city embraces the winter season with outdoor activities and festive events, the prolonged cold weather may not be suitable for individuals who prefer milder climates.

Pro: Diverse culinary scene

Holyoke boasts a diverse culinary scene, with a wide range of dining options to suit every palate. From authentic Puerto Rican cuisine at El Chinchorro Boricua to trendy cafes and international restaurants, residents can indulge in a variety of culinary experiences. The city’s food festivals and farmers’ markets also contribute to the vibrant food culture, allowing residents to savor fresh, locally sourced ingredients and support the community’s culinary entrepreneurs.

Con: Limited nightlife options

Residents seeking a vibrant nightlife scene may find that Holyoke offers limited options for evening entertainment. While the city has local bars, pubs, and cultural venues, the nightlife may not be as bustling as in larger urban centers. Individuals looking for a bustling nightlife with a wide array of late-night activities may need to explore neighboring cities for additional options.

Pro: Rich cultural heritage

Holyoke is steeped in history and boasts a rich cultural heritage. The city is home to the Wistariahurst Museum, a historic house museum that offers a glimpse into the area’s past. Residents can also explore the Holyoke Canal System, a National Historic Landmark, and learn about the city’s industrial history. The vibrant arts scene, including the Holyoke Creative Arts Center and Paper City Studios, provides ample opportunities for residents to engage with and appreciate the local culture.

Con: Limited retail and shopping options

While Holyoke offers a variety of local businesses and specialty stores, the city may have limited chain retail and shopping options compared to larger commercial centers. Residents seeking extensive shopping malls, major retail chains, or luxury boutiques may need to travel to nearby cities for a broader selection of consumer goods. The limited retail landscape may impact the convenience and variety of shopping experiences for residents.

Pro:  Educational opportunities

Holyoke is home to educational institutions such as Mount Holyoke College, Holyoke Community College, and the Massachusetts Green High Performance Computing Center, providing residents with access to diverse learning opportunities and resources. The city’s commitment to education is evident through initiatives that support lifelong learning, workforce development, and academic enrichment, making it an ideal place for individuals seeking personal and professional growth.

Con: Limited cultural amenities

While Holyoke has a rich cultural heritage, the city may have limited cultural amenities compared to larger metropolitan areas. Residents seeking a wide array of museums, performing arts centers, and cultural institutions may find that Holyoke’s cultural offerings are more modest in scale. Individuals with a strong interest in diverse cultural experiences may need to explore nearby cities to fulfill their cultural pursuits.

Pro: Convenient transportation options

Holyoke provides convenient transportation options for residents, including access to public transit, bike-friendly infrastructure, and walkable neighborhoods. The city’s proximity to major highways and rail lines facilitates easy commuting to neighboring areas, while the PVTA bus system offers reliable and accessible public transportation within the city and beyond. Additionally, the development of pedestrian-friendly pathways and bike lanes promotes sustainable and active modes of transportation.