How Rate Increases Effect Buyers

Simply, the rise in interest rates means that you will be paying a higher mortgage payment for the same loan amount. The chart below and examples explain how the rise in rates effect a buyer’s purchasing power.

For example, if a buyer put 20% down on a $525,000 home, their 30-year fixed mortgage payment would be $2,128.08 per month; for a $420,000 loan at 4.500%. The same loan amount at 5.000% would cost $2,254.65; a little more than $125 per month higher.

If that same buyer waited until rates were at 5.500%, they would need to lower their loan amount to $380,000 in order to keep a similar payment. If they were still looking at $525,000 homes, they would need to bring in an additional $40,000 down payment to make up the difference in the rate increase.

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As shown in the chart above, when mortgage rates are increasing little by little, a buyer’s purchasing power is decreasing little by little. 

If you’ve been on the fence about purchasing a home, now may be the time to consider taking that step forward to see what you can qualify for. You can apply on my website to see where you stand. If you’re not in CA, send me an email and I can refer you to a reputable loan officer in the state you’re looking to purchase in.

imgres-4.png imgres-3.png imgres.png

 Photo source: https://floridasuretybonds.com/floridas-workers-comp-rate-increase-approved/
Rates quoted in the spreadsheet do not include APR.

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