Interest Rates and Monthly Payments
How much would my monthly payments rise, as the interest rates rise?
Alright so there was a big buzz about interest rates hitting a 7 year high the past couple months at 5%.
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So what i’m going to do is try to keep it short, but map out how interest rates affect your monthly payments and give you my personal take on how big of a deal the interest rate factor is, in the big scheme of things.
Examples we’re going to use is if you’re hypothetically buying a single family home for $750,000 with 10% down (average) on a 30 year mortgage.
Interest rates, we’re going to use the interest rates 2 years ago (3.4%) 1 year ago (3.9%) February (4.4%), now 5% and possible future 5.5%.
3.4% - est monthly $3,905
3.9%- est monthly $4,096
4.4% - est monthly $4,292
5% - est monthly $4,535
5.5% - est monthly $4,744
Calculated using The Mortgage Report mortgage calculator.
Alright, as you can see, interest rates have been rising.
This may scare you, you may think “why should I buy, i could be saving $800/month if interest rates go back down?”
Great question, let’s look over the scheme of things.
If you buy a home for $750,000.
Live in it for 5-10 years.
With appreciation of 5-10% per year. (According to Zillow)
You just built anywhere from $37,500 - $75,000 in one year of equity, depending on your investment, etc.
Then that $750,000 house is now a $800,000 house and your growing another 5-10% in year two (give or take).
Especially now, home prices are starting to “flatten out,” so what you’d be paying in interest, you could probably find a “deal” that would make up for that.
My point is for you future home buyers is to NOT be scared of the interest rate rise too much and look at buying a home as a long term appreciating asset.
Sit down, do some math, and see what would make sense for you and your future.
If you’d like to ask me any questions i’m always available for a cup of coffee, phone call, or by e-mail.
Hope this video was valuable!
If you have any questions about the market, if you’re a buyer or seller, don’t hesitate to reach out. Would love to hear from you.
You can easily schedule a consultation, where we can figure out your goals, needs, and go from there.
Thanks for reading!