While mortgage interest rates remain near historic lows, they’ve started creeping up this year. As the economy continues to recover from the effects of the pandemic, experts are predicting that rates could continue to rise. So, what does this mean if you're planning to buy a home?
As rates go up, the amount of home you can afford goes down. For every 1% increase in interest rates, your buying power decreases by about 10%.
See how much difference even a small rate increase can make:
| Monthly Payment (P&I) | $1,500 | $1,500 | $1,500 |
| Interest Rate | 3.0% | 3.5% | 4.0% |
| Annual Percentage Rate (APR)* | 3.1% | 3.6% | 4.11% |
| Loan Amount | $356,000 | $334,000 | $314,160 |
| Purchase Price** | $445.000 | $417,500 | $392,700 |
Think of what that buying power could translate to — a better neighborhood or school district, a move-in-ready home that requires no renovations, a larger space for your growing family? An increase in rates could limit your options.
A higher interest rate also means you’ll spend more money on interest over the life of your loan, causing you to pay more for your home in the long run.
If you’re ready to buy a home, don’t wait until rates climb even higher. Get more for your money by locking in a low rate! Contact a Mortgage Banker today!
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