Most home buyers don’t realize the true impact interest rates have on their buying power aside from the higher/lower payment they lock in for the foreseeable future.
The fact is, mortgage rates have taken a sharp upturn now near 4% compared to 3.25% just a few months ago. Take a look at the change in monthly payment this rise has caused:
An extra $126 per month may seem negligible but that translates to roughly $45,600 over the life of the loan.
Here’s something to think about, if I told you I paid $50,000 above market value for a property, would you not think I was crazy?
Yet that is what happens every time interest rates move up.
But wait, there’s more. Rising rates not only cost you more every month, they also limit your buying power. Taking the example above, for a home buyer to get a $1,300/mo payment at a 4% interest rate, the loan amount would now have to be $273,000 that’s a $27,000 drop in what you can afford to buy in comparison.
Change in mortgage rates in California for 30-year fixed-rate mortgages since April 2013
The Bottom Line: The real estate market is changing and changing fast. It’s important for you to get in touch with a real estate professional you trust and go over what your short and long term goals are in order to capitalize on the market when the conditions are right for your specific situation.
Please know that I am always available to answer questions you may have about real estate and that I am never too busy for your referrals.
About Daniel Di Matteo
THE REAL ESTATE BUSINESS HAS LESS TO DO ABOUT SELLING PROPERTIES AND EVERYTHING TO DO ABOUT HELPING PEOPLE.
