It may seem like a funny title, but in truth, this isn’t funny business at all. According to the National Association of Realtors, “Mortgage rates are at their highest levels in more than four years.” Granted, if you’ve been around long enough, you know that interest rates are still incredibly low when compared to rates seen in the 1980’s. But we’re not living in the past, and home prices continue to rise.
If you don’t know, interest rates play an important role in the purchase and financing of real estate. As interest rates continue to rise, some buyers may be forced to look for lower priced homes, which often means smaller dwellings in more distant neighborhoods.
On the other hand, increases to mortgage rates may not be detrimental to all buyers, especially when the increases translate into a mere $50-$150 more per month. But financial-savvy buyers know that even minor increases can add up over time. Take the following the example:
> Purchase a $300,000 home with a 30-year fixed-rate mortgage and a 20% downpayment and a 4% interest rate. > Purchase the same home with the same financing commitment at a 5% interest rate.
The difference in mortgage payments amounts to approximately $142/month. Should you plan to live in the home for the next 30 years, you will have paid an extra $51,000 over the life of the loan due to that 1% increase.
For the most part, rising interest rates creates a sense of urgency – a sort of push for those who have been seriously considering the option to buy. So the question is: Are you ready to buy now? If you’re not sure how any of this affects you, please contact me. I will be more than happy to discuss it with you.