I'm A Buyer! How Will Rising Interest Rates Affect My Mortgage?

It’s been all over the news the past week.  Interest rates for mortgages are rising.  This week, the average rate for a 30-year fixed conventional loan went over 4%. 

Talk to someone who bought a house in September 1981 and they will probably not have much sympathy for the 4% of today.  Back then the average interest rate was over 18%!

But buyers over the last 2 years have been spoiled with historically low interest rates and new buyers just coming into the market want to join in on the fun.  The good news for buyers today:  rates are still incredibly low and you should take advantage of them while they are still around.  The party is not over yet!

That being said, every uptick in the interest rate does affect your monthly mortgage payment.  How much?  This chart illustrates the Principal & Interest payments at different purchase price amounts and different interest rates.  All of these assume 20% down on a Conventional  30-Year Fixed Loan.  Just for fun, and a little perspective, I added in the 18% of 1981.

Sales Price    $200,000       $300,000      $400,000      $500,000

(Loan Amt)  ($160K)         ($240K)        ($320K)        ($400K)

3.5%               $718            $1,078           $1,437          $1,796

4.0%               $764            $1,146           $1,528          $1,910

4.5%               $811            $1,216           $1,621          $2,027

5.0%               $859            $1,288           $1,718          $2,147

5.5%               $908            $1,363           $1,817          $2,271

6.0%               $959            $1,439           $1,919          $2,398

Yikes! 18%       $2,411         $3,617           $4,823          $6,028

Rising interest rates were inevitable.  Nothing that good can last forever.  I do, however, believe the rise will be gradual, giving the buyers today time to enjoy these still-very-low rates.  Although the 4% interest rate buyer may be a little envious of the 3.25% buyer of this past January, everybody is still getting their loan “on sale” in comparison to historical rates.

Stay calm and keep house hunting!

Melanie Atkinson is a Westchase  area Realtor with The Wood Team at Coldwell Banker.  She can be reached at 813-368-6084 or Melanie.atkinson@floridamoves.com

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