We’re all spoiled rotten by today’s low interest rates.
But, our current interest rate environment will not last forever.
Our national economy is slowly improving and we can probably expect higher interest rates in the not too distant future.
Curious about how higher rates will affect monthly payments?
Here are some comparisons of monthly principal/interest monthly payments at varying interest rates, using a $200,000 30-year fixed rate loan:
- $200,000 @ 3.5% = $898.09
- $200,000 @ 4.0% = $954.83 (+6.3%)
- $200,000 @ 4.5% = $1,013.37 (+6.13%)
- $200,000 @ 5.0% = $1,073.64 (+5.95%)
- $200,000 @ 5.5% = $1,135.58 (+5.77%)
- $200,000 @ 6.0% = $1,199.10 (+5.59%)
As you can see, your interest rate is probably more important than the price you pay for your home.
If you wait to buy a home until rates rise from 3.5% to 6.0%, your monthly payment jumps from $898.09 to $1,199.10 ~ a 33.5% increase!
Worse yet, that payment difference totals $108,363.60 over the life of the loan!
If you wait to buy until prices AND interest rates have risen, you could easily get priced out of the market.
In our current market, it’s a good idea to focus on your financing more than the price of the home.
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