What does the news of interest rate hike mean to buyers? This year thousands of people will buy their first home. Thousands more will downsize, upgrade or buy a second home. While each buyer is unique, they are all in the same boat when it comes to one thing. Mortgage interest rates. This week, the federal reserve announced that they are raising interest rates an increase of 1.5 and 1.75%. Rising interest rates, while a signal of a healthy economy, also affects mortgage rates.
Current interest rates are between 4.1 and 4.8%, depending on loan type and duration. An increase to 5%, while still a reasonable rate can affect the bottom line for borrowers. And while .5 to .9 % increase does not seem like much in terms of well, just about anything, when it comes to a mortgage it can mean quite a lot. In a shifting market such as ours (believe me, we are shifting), it makes sense to have cash on hand. In any market, it makes sense to spend money on more house, not more interest.
The average home price in Chattanooga right now is about $215,000. As a first time home buyer, it is not out of the realm of reasonable to buy your first home.The current Chattanooga market is a seller’s market and homes are selling within 10% of full price, some with multiple offers. When you find the home you want, you have to be ready to purchase. Knowing what you are going to pay for your home in the long run can help you determine your actual budget.
With an interest rate of 4.1 %, financing $200,000 your monthly payment will be $966 and your total pay off after 30 years will be $347,903. At 5% your payments will be $100 a month more and, here’s the kicker, pay off will be $386,512. $38, 609 is a huge difference if you ask me. Saving that $100 a month over 30 years at 2% interest in a savings account will give you a nice nest egg of $49,272. Think of what you can do with nearly $50,000 when you are in your early 50’s. College, wedding, fantastic entire family trip to Hawaii… the possibilities are endless.
That $100 a month does not seem like much when it comes to a mortgage and if you are getting more home for that money, that is fantastic. However, interest adds nothing of value to your life. If you are considering purchasing a home, now is the time to find your perfect home and lock in your interest rate before they rise.
Looking to get pre-approved for a mortgage? We work with excellent lenders who will make sure you get the very best rate and can help you save money. Give us a call or email us today to set up your buyer consultation.