Attention buyers and agents. I don't want to try and predict the future or scare people into making quick decisions. But lets be honest for a minute. Most economist are saying we can expect to see rising mortgage interest rates in the next year. Honestly it would be a really good thing for the overall economy but thats not the point of this post.
Rising interest rates will slow down the housing boom if rates rise more than half of a percent. Interest rates are most likely going to jump up quickly again like they did last year. Take a look at the 3 year chart from Bankrate.com below.
We enjoyed a great run there for a while. But if you look at around June of 2013 we saw a very quick increase. Between May and July we saw an increase of nearly 1%. To give you an aidea of how much that affects the normal persons buying power lets look at an average loan in El Paso.
Purchase Price: $120,000
Down Payment 5% or $6,000
Monthly Principle and Interest at 4.5% = $578
Add Taxes, Insurance and PMI = $418.00
Total Monthly Payment = $996.00
Now lets assume the rate is 5.5% as many experts expect in 2015
Purchase Price: $120,000
Down Payment 5% or $6,000
Monthly Principle and Interest at 5.5% = $647
Add Taxes, Insurance and PMI = $418.00
Total Monthly Payment = $1,066
A 1% rise in mortgage rates translated into a $70 monthly increase in payment. The larger the mortgage the larger the payment increase.
Over a 7 year period (the average time americans stay in the same home) you would have spent an additional $5,880 on monthly payments by waiting. The bummer about interest rate increases is they usually catch peopl off guard and are very quick. Interest rate drops seem to happen more gradually.
You can play with your own numbers on my website here to see how a rate increase would affect your home buying plans.
No comments:
Post a Comment