What Is The Cost of Waiting?
Did You Know The Average Mortgage Interest Rate Over The Last 20 Years Was 7.44%?*
Most experts agree that mortgage interest rates will rise from their current historic lows.
Taking the historical average into account, buyers should be aware of how rising interest rates effect affordability.
The example above illustrates how a rise of 1-2% in an interest rate lowers a buyer’s buying power.
The numbers will change slightly when property tax and insurance is added to the mix, but this illustration helps buyers understand how rising rates impact their buying power.
A 1% increase in the mortgage interest rate will lower a buyer’s purchase price affordability by just over 10% on a conforming jumbo and jumbo loan.
A 2% increase in the mortgage interest rate will lower a buyer’s purchasing power by over 19%.
When rates rise, fence-sitters are likely to race into the market, which may add to price inflation, making matters worse for buyers.
Even if values drop after a home purchase, most buyers would still benefit from the mortgage interest and property tax deduction compared to renting. That's another analysis you should be looking at if you're thinking about buying a home.
Facts are friendly and it pays to run the numbers!
A good lender can show you how to get the seller to help you lower your interest rate. The Seller Buydown Strategy is used by saavy Realtors and lenders.
*Conforming historical rate average is based on a Bankrate.com survey of annual average interest rates. These are not rate quotes, they are examples based on one set of criteria. Some numbers have been rounded off for illustrative purposes.
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