As interest rates begin to rise buyers lose purchasing power. Here is another opportunity to educate your buyers or fence sitters to help them understand the cost of waiting. Simply stated, for every 1% interest rates rise, a buyer will lose 10% purchasing power. With a rate of 4.25% on a 200,000 loan, the payment would be $983/month (that’s amazing on its own).
When interest rates rise to 5.25% a buyer would have to have a $180,000 loan to keep nearly the same payment. In this example at 5.25% on a $180,000 loan the payment would be $993/month. So either the buyer will have to increase their down payment by $20,000 or they have to find a lower priced home to keep the same payment. Check out the chart below that shows the impact of rising rates on mortgage payments and reduced purchasing power.
In addition in this rising home price environment the impact is exacerbated because while the purchasing power decreases from higher rates, home prices are increasing. So the home that you qualified for a few months ago may be out of your financial reach today.
Most experts agree that interest rates will be on the rise this year. So if you plan on making a move into a home, why not act now while you get the biggest bang for your buck. It could be the difference of getting your dream house or having to settle for 3rd or 4th choice. Or the difference between living in the best school district or one that has substandard academics.
It doesn’t matter if you’re purchasing a vacation home in Charleston or San Diego, a first time buyer, or a seasoned investor now is a great time to buy. Low interest rates combined with low home prices are creating historical opportunities. Give us a call for the lowest rate mortgages available anywhere.