"Are mortgage rates gonna go up?”
Boy, I’d be willing to bet I get that question just about as often as Realtors get: “Is the market softening?”
We know that there are a lot of fence-sitters out there, waiting for home prices to move lower. But what is the cost of waiting? A great rule of thumb to for future homebuyers is that a 1% increase in interest rates decreases your buying power by about 8% (when including property tax and insurance)!
Here’s an example for reference:
- $1,000,000 purchase
- 20% down ($200,000)
- 4.5% rate
Monthly principle, interest, tax & insurance = $5,195
- $920,000 purchase
- 22% down ($200,000 to equate to first example)
- 5.5% rate
Monthly principle, interest, tax & insurance = $5,146
So is waiting really worth it?