If you have been reading my last few articles I have posted, the mortgage industry has been put on alert with recent rising interest rates and no confidence in whether the rates will calm down or if we will be on a roller coaster for a while. If you are like the many people who still want to purchase homes due to the skyrocketing rental amounts you need to under House Affordability When Interest Rates Rise. This isn’t a topic we have had to tackle in the last couple years as interest rates have always stayed near record lows and there wasn’t much volatility in them as we went from month to month. Now you are probably thinking how is House Affordability When Interest Rates Rise and as you could probably imagine, it costs more money for you to afford the same property as your monthly has increased by a small amount, but has increased none the less.
With more reports coming out recently that interest rates will stay above 4% going into next year, you can take an optimistic look into the situation and see that if interest rates are only going to go up, it is still a good time to purchase a home and lock in a rate under 4% or as close as you can to it. We might have seen mortgage rates in the 3’s for the last time for a while, so still, a rate around 4% is really not that bad. Now if I can illustrate House Affordability When Interest Rates Rise we can look at a fixed monthly payment that you desire and we can determine what the loan price can be as interest rates go on the rise. Let’s say for example you are happy with a $1,500 monthly payment to cover principal and interest. With a 3.75% interest rate, you can get a loan for $325,000. At 4% you could only get a loan for $315,000 to keep your $1,500 payment or a decrease in $10,000 buying power. To go even further, if interest rates were at 4.5%, you could only finance $295,000 or a $30,000 reduction in buying power by an increase in 0.75% to interest rates. As you can see, there is a big affect on buying power when mortgage rates start increasing.
For those of you that are worried about interest rates on the rise, it is probably a good time to bite the bullet so to speak and get in to buying a home. If interest rates increase another 1% or so, it could potentially price a lot of people out of the market so your time would be now to get that house you have your eye on. If you are interested in locking in a rate for your mortgage or refinance ASAP please call me at 888-900-1020 ASAP or you can email me at firstname.lastname@example.org, or visit my website www.loanconsultants.org.