As interest rates increase, the group of people who can afford to buy a home decreases just a little. New mortgage rules have gone into effect this year which tightens the payment to income ratios. As our summer demand season approaches, experts are predicting interest rates will rise.
A half percent rise in interest rate roughly translates to a five percent increase in price. To demonstrate my statement, let’s explore some math.
- Finance 100 percent of a $250K home, 4.5 percent interest, 30 year term, payments are around $1,266.71 a month.
- Mortgage rate increases to five percent, your monthly payment becomes $1,342.05.
- Increase the home value by five percent to $262,250, 4.5 percent interest, payments are around $1,330.05.
The difference in the amounts of these two payments is so little that it justifies saying that a half percent change in interest rates is about equal to a five percent change in price.
Home prices are rising. NAR has reported a rise of 11 percent just last year. Mortgage rates are rising. A buyer who would qualify to buy a home now, might not qualify in six months. Don’t be that buyer who, down the road, regrets not taking the plunge today. Let me send you a list of Fairfax homes for sale and help you get into a home now while rates are still down and prices are reasonable. Call me today at (703) 303-4010.