If you’ve been following our blog in the past you know that we’ve frequently discussed the trend of increasing mortgage rates and why now is a good time to buy because of this. Many potential buyers, especially first time homebuyers, don’t understand how much of a direct impact an increased mortgage rate can have on their monthly mortgage payment. This is why we can’t stress enough why now might be a better time to purchase a home rather than waiting a year or two.
Currently, mortgage rates are right around 4% and by the end of the year one personal finance magazine states they’ll be closer to 4.5%. Where will they be by the end of next year? About 1% higher than they are right now at a little more than 5%. While this is still low when compared to mortgage interest rates in the past, compared to where interest rates have been lately, this is actually high.
Again, while many people that are inexperienced with the real estate market might not understand exactly how much of an impact a percent can have on their payment depending on where they live. In a study released by the real estate website, Zillow, they looked at how a one percent increase would impact monthly mortgage payments in metro areas throughout the nation. While the size of the increase was dependent on the metro area, many places in the southern California area will see mortgage payment increases of anywhere from $350-$700. This is obviously a considerable amount and will impact how much of a home people are actually able to afford.
If you’ve decided to wait on purchasing a home for the time being, just keep in mind that interest rates are only headed up. Not only will this affect the type and size of home you can afford, but it will also have a direct impact on the rest of your life. If you wait to purchase you may not be able to enjoy some things that you’re able to afford today.