By now, virtually every buyer has heard that interest rates are near historic lows....BUT, do you really know what that translates to in terms of your monthly payment or how much home you can afford? The other day Heather Myott from Coldwell Banker Mortgage shared this very enlightening calculation, and I thought I would pass it along!
Take the following scenario for example: If a home has a purchase price of $200,000 and a buyer is putting down 3.5% at the current rate of 5.2% for a 30 year fixed rate loan, a buyer's monthly mortgage payment would be $1,078.33.
Now, take the same example as above, but pretend the interest rate increased by 1% to a total interest rate of 6.200%. The new monthly mortgage payment would be $1,202.75. *That's an extra $124.42 that the buyer is paying EACH MONTH!*
To put a different angle on it: IF at the increased rate of 6.200% the buyer wanted to keep the same monthly payment of $1,078.33 (from the first scenario), the buyer would have to purchase a home for $179,000- THAT'S OVER 10% LESS HOME FOR THE SAME AMOUNT OF MONEY!
If you are considering purchasing a home (and potentially taking advantage of the homebuyer tax credit), a great place to start is by speaking with a well-qualified lender that can tell you exactly how much home you can afford. Feel free to call or e-mail me today, and I can put you in touch with a fabulous lender who can help you get pre-approved QUICKLY!
BOTTOM LINE: Economists are predicting that interest rates will experience modest increases in the second half of this year, so don't wait to start your home search! Although we have no way of knowing precisely when interest rates will rise or by exactly how much, we DO know that interest rates ARE incredibly low RIGHT now! So why risk being able to (potentially) afford 10% less home?!
-Jamie Wright, REALTOR