There has been a lot of chatter lately about interest rates rising. If you have lots of money invested in C.D.’s, higher rates are a good thing!! If you are thinking about financing anything (especially something major, like a home) then higher rates are not so good. How all this macro-economics stuff works is far beyond most of us, but what it means in our lives is pretty simple: Higher rates means higher mortgage payments, and quite often, it means a buyer can afford less house.
So far mortgage interest rates have risen approximately 1% in the past 6-8 months or so from historical lows of around 3.25% to around 4.25%-4.50% today. The conventional wisdom is that rates will go up another 1% or so in the next 6-12 months; lets look at what that means to a home buyer. If you borrow $100,000 at the current rate of 4.25%, your principle and interest payment will be about $492/month. The same loan taken at an interest rate of 5.25% has a payment of $552/month – $60 more each month and an extra $21,600 over the 30 year life of the loan. So higher rates costs you lots more money, and it also may mean you can no longer qualify for the property you want to buy as the lender uses the amount of any loan payment in figuring out the amount that you can borrow.
Now, buying property is far too important a move to rush into. However, if you plan to make a purchase in the near future, your payments will never be lower than they are today. If you have questions about interest rates or financing of real estate, contact your lender soon. If you have questions about the local housing/lake shore/recreational property market or anything that is currently for sale, contact your Johnson Hometown Realty expert today and let us help you find what you are looking for!!!
2402 First Avenue, Hibbing, MN ….. 218-263-4411…..JohnsonHometownRealty.com
