How Rising Interest Rates Affect Your Buying Power

How Rising Rates Can Impact YOUR Purchase Power

First I want to begin by recognizing how blessed we have been over the last 7-9 years to witness such historic lows with mortgage interest rates. Rates in the 3 percentile had become the norm and expected even with the most average of credit scores at points in time recently.

Having said that it’s equally important to recognize that they have not always been like cash-1169650_640.jpgthis, if you are younger, ask your parents or grandparents what they had for an interest rate a decade or two ago when they bought their first home or simply google historical interest rates from the 70’s to present and you’ll begin to realize and appreciate how low they have been and continue to be and why this is such an advantageous time to become a homeowner.

All good things can come to an end…

Now we all hope that this doesn’t ring true for our beloved local sports teams but when it comes to interest rates, we know it’s inevitable. Interest rates have always fluctuated based on many factors and given the fact that we have reached a floor over the last few years, the only direction left to go is an upward motion. That fact is becoming ever more apparent so far this year so I wanted to provide a breakdown of how an increase in rate can affect your purchase power;

The below chart is designed for the purchase price conscious buyer and represents how the maximum loan amount you qualify for is impacted when interest rates increase;

Interest Rate 4.000% 4.500% 5.000%
Loan Amount $314,191.86 $296,041.74 $279,422.43
Monthly Payment

(Principal & Interest)

$1,500.00 $1,500.00 $1,500.00
Chart is based on a 30yr Fixed Rate Conventional loan.

Rates displayed are for example only and are subject to change based on market conditions and the borrower’s individual qualifications.

The next chart is designed for the budget conscious buyer and represents how your monthly payment is impacted when interest rates increase;

 

Interest Rate 4.000% 4.500% 5.000%
Loan Amount $300,000.00 $300,000.00 $300,000.00
Monthly Payment

(Principal & Interest)

$1,432.25 $1,520.06 $1,610.46
Chart is based on a 30yr Fixed Rate Conventional loan.

Rates displayed are for example only and are subject to change based on market conditions and the borrower’s individual qualifications.

Please be sure to check out our YouTube Channel for more on this subject and other useful tips

 The sky is definitely not falling here but the writing is on the wall…

  • If you have previously been pre-approved for financing I encourage you to follow mortgage-149882_640.pngup with your lender for an update on how rising rates may impact your individual situation.
  • If you have not been pre-approved yet or simply want a second opinion I welcome you to contact our team so we can assist you in determining your eligibility and capabilities.

And PLEASE always remember…

When purchasing real estate choosing the right professionals to assist you in YOUR journey will be the key to YOUR success, I have been blessed in my career to surround myself with whom I consider the very best at their profession and welcome you to contact me and my team to help Guide You Home.

Content submitted by;
John Faria
Sr. Mortgage Advisor, NMLS #397424
Province Mortgage Associates, Inc., NMLS #2861

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