What Do Rising Mortgage Rates Mean To Buyers?
We've all been hearing about a slow, steady rise in mortgage rates over the late spring and early summer of this year. Mortgage rates have been at historically low levels for a long time now, and smart buyers and investors have taken advantage of this situation spurring a growth in real estate sales activity throughout the Tampa Bay area and the nation.
But with changes in the Federal Reserve's stimulus plans, mortgage rates have been working their way up for several months. Today, these rates have advanced to somewhere in the neighborhood of 4% for a 30-year fixed mortgage. That's higher than they have been in the past, but hardly earth-shattering. Of course, this story is being written by a fellow who felt like he got bargain rate of only 8.5% on his first home purchase in the mid-1970's and has seen commercial mortgages reach 17% or more during the presidency of Jimmy Carter -- ah, the good ol' days!
Still, what do rising interest rates mean to today's home buyer?
Well, let's take a look.
Assume you are buying a home that will carry a $200,000 mortgage. If you could have gotten a mortgage of 3.5% a few months ago, your monthly payment would have been $898.
But if you waited until now to buy that same house with a 4% mortgage, you would likely be paying about $954 per month. That's an increase of $56 monthly for the next 30 years. If you were to keep that house and pay off that mortgage, that extra 1/2-percent in mortgage interest would mean you paid an additional $20,160 for the property.
If you keep waiting until mortgage rates are at 4-1/2%, the monthly payment will increase to $1,014. That's a monthly difference of $116 higher than the 3-1/2% rate some of your friends may have. In the life of the mortgage, it means you will have paid an additional $41,760 for the house.
So here's my advice. If you are going to buy real estate, lock in your rate now and buy as soon as you can. In both the short run and the long run, it will save you money.
But with changes in the Federal Reserve's stimulus plans, mortgage rates have been working their way up for several months. Today, these rates have advanced to somewhere in the neighborhood of 4% for a 30-year fixed mortgage. That's higher than they have been in the past, but hardly earth-shattering. Of course, this story is being written by a fellow who felt like he got bargain rate of only 8.5% on his first home purchase in the mid-1970's and has seen commercial mortgages reach 17% or more during the presidency of Jimmy Carter -- ah, the good ol' days!
Still, what do rising interest rates mean to today's home buyer?
Well, let's take a look.
Assume you are buying a home that will carry a $200,000 mortgage. If you could have gotten a mortgage of 3.5% a few months ago, your monthly payment would have been $898.
But if you waited until now to buy that same house with a 4% mortgage, you would likely be paying about $954 per month. That's an increase of $56 monthly for the next 30 years. If you were to keep that house and pay off that mortgage, that extra 1/2-percent in mortgage interest would mean you paid an additional $20,160 for the property.
If you keep waiting until mortgage rates are at 4-1/2%, the monthly payment will increase to $1,014. That's a monthly difference of $116 higher than the 3-1/2% rate some of your friends may have. In the life of the mortgage, it means you will have paid an additional $41,760 for the house.
So here's my advice. If you are going to buy real estate, lock in your rate now and buy as soon as you can. In both the short run and the long run, it will save you money.
-30-
posted by Terry Ward at 5:38 AM
1 Comments:
Really Nice blog …. Thanks for share with us!
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