Here is the Rand Mortgage November 28th 2010 Weekend Mortgage Update, with rates, contact information, and helpful links. This week, we have some special charts that show the effect of increasing rates on buyers' borrowing power. In case you have a mortgage question, or need a quick preapproval, here is David Folwarski Contact information: ______________________ Rate Information Rates crept up a little this week, as you can see. Remember that rates for condos and coops are a little higher than the quoted rate.
Product Rate Payment/ $100K 30 Year Fixed (Conforming) 4.625% $514.14 15 Year Fixed (Conforming) 3.875 $733.44 FHA 4.5 $506.69 30 Year Fixed (Conforming Plus) 5.125% $544.49 30-Year JUMBO 4.875% $529.21
With rates creeping up even just a little, I wanted to share with you these two charts that show the effect of increasing rates on (1) monthly payments, and (2) borrowing power.
1. For every point increase in interest rates, monthly payments go up about 12%.
As rates go up, monthly payment goes up. As this chart shows, the monthly payment on a $300,000 loan goes up almost 40% with a change of rates from 4.5% to 7.5% (where rates were early in this decade). With that change in rate, buyers taking out a $300,000 loan see their payment go from $1,520 a month to almost $2,100 a month, and buyers taking out a $500,000 loan see their payment go from under $2,700 a month to almost $3,500 a month.
How does your payment change as rates change?
|
Interest Rate (30 year fixed) |
$300,000 Loan |
$500,000 Loan |
Percentage of Monthly Payment Increase from 4.5% rate |
||
|
Monthly Payment |
Increase in Monthly Payment from 4.5% |
Monthly Payment |
Increase in Monthly Payment from 4.5% rate |
||
|
4.5% |
$1,520 |
N/A |
$2,533 |
N/A |
|
|
5.0% |
$1,610 |
$90 |
$2,684 |
$151 |
5.9% |
|
5.5% |
$1,703 |
$183 |
$2,839 |
$306 |
12.0% |
|
6.0% |
$1,798 |
$278 |
$2,998 |
$465 |
18.3% |
|
6.5% |
$1,896 |
$376 |
$3,160 |
$627 |
24.7% |
|
7.0% |
$1,995 |
$475 |
$3,326 |
$793 |
31.3% |
|
7.5% |
$2,097 |
$577 |
$3,496 |
$963 |
38.0% |
2. For every one point increase in interest rates, buying power goes down about 10%.
Similarly, if you think of buying a home based on a fixed payment that a buyer can afford, increases in rates reduce borrowing power. If your buyer wants to stick to a $2,000 monthly payment, every half-point increase in rate (say from 4.5% to 5.0%) reduces her borrowing power by about 5%. That means that if rates go up half a point to 5%, prices would have to come down 5% to allow for the buyer to keep the same monthly payment.
How much can you borrow at a certain monthly payment?
|
Interest Rate (30 year fixed) |
$2,000 Monthly Payment |
$3,000 Monthly Payment |
Percentage Loss of Borrowing Power from 4.5% rate |
||
|
Borrowing Power |
Loss of Borrowing Power from 4.5% |
Borrowing Power |
Loss of Borrowing Power from 4.5% |
||
|
4.5% |
$394,722 |
N/A |
$ 592,083 |
N/A |
N/A |
|
5.0% |
$372,563 |
-$22,159 |
$ 558,844 |
-$33,239 |
-5.6% |
|
5.5% |
$352,244 |
-$42,478 |
$ 528,365 |
-$63,718 |
-10.8% |
|
6.0% |
$333,583 |
-$61,1139 |
$ 500,375 |
-$91,708 |
-15.5% |
|
6.5% |
$316,422 |
-$78,300 |
$ 474,362 |
-$117,721 |
-19.9% |
|
7.0% |
$300,615 |
-$94,107 |
$ 450,923 |
-$141,160 |
-23.8% |
|
7.5% |
$286,035 |
-$109,687 |
$ 429,053 |
$163,030 |
-27.5% |
Calculator Links
In case you or your clients want to make some quick calculations, here are the links for the Rand Mortgage calculators:
- Monthly Payment Calculator (enter loan amount and rate, get monthly payment)
- How Much Can I Afford Calculator (enter desired monthly payment and rate, get loan amount).
- PreQualification Calculator (enter monthly income, debts, loan amount, rate, and taxes, and get loan amount).
News Links
Two interesting things this week. First, we've had a tick up in mortgage rates, which is largely the result of some increasing optimism about the economy. Second, we had some good economic news, with both employment increasing and a lowering of the number of homeowners who are falling behind in their mortgages.
WSJ: Mortgage Rates Jump, Delinquencies Decline
NYT: October Was New York State's Best Month for New Jobs in Years, Data Show
NYT: Fewer Fall Delinquent in Paying Mortgages
Anthony Stokes Pereira, Better Homes and Gardens Rand Realty
I can help you with every aspect of buying or selling your home because I'm experienced, because I am a Better Homes and Gardens Rand Realty Real Estate Professional . . .and because I care.
As your Better Homes and Gardens Rand Realty Sales Professional, I will provide you with the information you need to make an educated decision.
The relationship between a home buyer or seller and their agent is based on trust, shared goals and understanding. I strive to continually improve and to do this I listen and take the needs and wants into consideration.
For assistance with any of your real estate needs, please contact me, whether it's to get started on helping you realize your goals and dreams, or just to ask a question - no pressure, no hassle, no obligation - just a friendly conversation. I would welcome the opportunity to make a difference for you.
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