Interest Rates are Going Up: What it Means for Home Buyers
Filed under: Real Estate Market
After many years of low interest rates, we are starting to see increases in the mortgage rates. As inventory stays low and demand continues to hold strong, is it likely that interest rates will continue increasing? If you’re thinking about buying or refinancing soon, then you need to know how these interest rates will affect your buying power.
How Interest Rates Affect Your Mortgage Payments
Higher interest rates affect your mortgage payments because it changes the amount of money you can spend on a home. Here’s a simple example:
If the interest rate increases by a quarter point, then it means that your buying power goes down by $10,000. The higher interest costs means that more of your monthly payment goes to the interest fees and less to the loan principle
But remember this: even though you are paying a little more for a higher interest rate, your home value is also appreciating at the same time. This increase in value helps to offset the difference.
Total Costs of a Home Purchase
The selling price isn’t the only number you should be looking at when you are buying a home. Remember that your interest rate and other details also affect the overall amount you will pay in the long run.
For example, if you wait to buy a home because you are hoping for a lower interest rate, home prices need to drop more than $10,000 or else you will be paying more money overall when you calculate the interest costs and home price. Make sure you are calculating all of the financial factors that affect your home purchase.
The Future is Unpredictable
You never know how interest rates will change in the future. Instead of basing your entire decision on current interest rates, make sure you are focused on what matters most: your family needs.
We can’t predict future home prices or interest rates, but we do know one proven strategy that builds financial freedom in the long run: investing in a home so that you can eventually pay the mortgage and live there without a monthly payment.
If you are looking for real estate help in Temecula, then I’m just a phone call away. Call, text, or email me at (951) 473-0390 or [email protected].