The Interest Rate Impact
Brent Wells June 9, 2017
Brent Wells June 9, 2017
Some Highlights: Interest rates have come a long way in the last 30 years. The interest rate you secure directly impacts your monthly payment and the amount of house that you can afford if you plan to stay within a certain budget. Interest rates are at their lowest in years… RIGHT NOW! If buying your first home, or moving up to the home of your dreams, is in your future, now may be the time to act!
A great piece from the REALTOR.com website explains how as little as 1/4 of a percent change can affect your purchasing power versus the income you earn.
Let's assume you want to purchase a median-priced home at $250,000. If interest rates go up by just 1/4 of one percent (.25%), you will need to earn an additional three percent (3%) in income to qualify for the same $250,000 house. If you don't expect your income to go up by 3%, then you must purchase a home priced 3% less. What's worse, for every .25% increase in interest, it ends up costing you an additional $9,518 in interest payments over the course of the loan. Now, if rates go up by one full percentage point (1%), that would cost you $38,072 in additional interest over the life of the loan. What if rates go up 1, 2, or 3 percent while you're waiting to 'time the market'? What will you actually save?
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