Do Rising Interest Rates Matter for Buyers?
With the market as hot as it is right now, many buyers ask if they should buy now or wait out the market. Interest rates are on the rise, but do those changes really even matter in the grand scheme of things? Let’s look at some examples to show you how much of an impact rising rates can have.
Suppose you’re looking to buy a $200,000 house at a 3.5% interest rate, and you want to put $10,000 down on it. For that home, your monthly payment would be $808. Over the course of the 30-year loan, you’ll pay $110,981 in just interest.
Now, if the rates rise slightly to 3.75%, that will make your monthly payment $834, which isn’t a big jump. However, over the life of the loan, that bumps up your total interest to $120,099. That’s almost $10,000 extra for a 0.25% rate increase!
What if rates climbed to 4%? That makes your monthly payment $859 and raises your total interest to $129,365.
Finally, suppose your rate increases to 4.5%. Your monthly payment would rise to $912, and your total interest would go up to $148,332. That’s all from just a 1% increase in the interest rate.
So does it matter that interest rates are rising? Absolutely; as interest rates go up, your buying power goes down. Many people think that it might be better to wait the market out, but truth be told, interest rates and home prices are both on the rise without an end in sight. It’s tough out there in the market, but it can cost you big time if you choose to wait.
If you have any questions about buying a home in today’s market, give me a call or send me an email. I’d love to connect with you and help you get into the home of your dreams.
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