Interest rates can have a big impact on your monthly mortgage payment, and with talk of rising rates on the horizon, it’s important to look at what it means for you. To give you an idea, today we’ll be taking a look at how an increase will affect a mortgage payment.
The median home price is currently $678,000. For these calculations, we’re assuming the home was purchased with a 20% down payment, and we’re just looking at what you’ll pay in principal and interest—not insurance, property taxes, etc.
Our interest rates have been hovering around 4.5%, and with this percentage, you will be paying approximately $2,748.26 each month.
If interest rates increase by 0.25% to a rate of 4.75%, your monthly payment will be $2,829.42. This is $81.16 more you’ll be paying each month.
If it increases another 0.25% to 5%, your payment goes up to $2,911.72—another $82.30 each month.
Rates are expected to rise to 5% this year, and an increase from 4.5% to 5% will cost you $163.46 extra each month. Unless income goes up a similar amount, this means people will have less buying power. As affordability drops due to interest rates increase, home values will drop as well.
If you have any questions about this or would like more information, feel free to reach out to me. I look forward to hearing from you soon.