How Bad Is It?

Mortgage and Lending with Guaranteed Rate, Marin County, CA NMLS: 22343

How Bad Is It?


As I type this blog post, it's raining outside, pouring actually.  And that's fitting because if you've been looking to get a mortgage since the presidential election, you've been facing your own personal deluge of sorts as well.  Interest rates are higher, no doubt about it, and the worst two week bond rout in the last 26 years has translated into approximately a half percent increase in rates to most programs.


So how bad is it?


There's a few ways to look at this, and the chart below shows that bond prices are approaching where bond market chartthey were exactly one year ago.  It's not as if we've returned to the Carter administration overnight, of course, and rates are still very favorable from a historical perspective.  In our chart here, note that the lower the lines go, the higher the rate, as bond prices and yields work inversely.


But the human mind doesn't tend to work inversely.   Most of us look at what's been lost in the immediate term and focus on "the one that got away."  If we know that rates could be as much as .5% higher, what does that do to the typical payment on a 30-year fixed rate loan?  Here's how we can do the math quickly, in our minds, to get some perspective on just how much/little has changed:


  • Loan amount:  $400,000
  • Payment at 3.500%:  $1796
  • Payment at 4.000%:  $1910
  • Difference:  $114 per month


How about the kinds of loans we see here in Marin County?


  • Loan amount:  $1,000,000
  • Payment at 3.500%:  $4490
  • Payment at 4.000%:  $4774
  • Difference:  $284 per month


Now follow along.  At today's rates, a half point increase in rate translates, roughly, to 3% of 1% of the loan amount.  So above our rough estimates using this formula in the field would have yielded $120 and $300 respectively.  Not too shabby.


As we go into the holiday season, winter weather, a new administration in Washington AND possibly higher rates for some time, there are a lot of reasons a homebuyer could be scared, doubtful, deterred or confused.  But let's not let the reality of the situation get overlooked.  If you were a committed homebuyer before the election and throughout 2016, are you really going to let a payment difference that might be the equivalent of your cell phone bill knock you off course?  And take it from someone who knows a thing or two about investing, Warren Buffett: "Buy when there's blood in the streets."


How bad is it?  That's up to you.  This rate change can be viewed as all negative, or it could be your ticket, at a very small premium, to home ownership, when others succumb to fear and uncertainty.


Make America Great Again, 



Rob Spinosa
Executive Loan Advisor
NMLS: 22343 CalBRE: 01297944
Cell: 415-367-5959 Fax: 415-366-1590 
1058 Redwood Highway, Frontage Road, Mill Valley, CA 94941




RPM Mortgage, Inc. – NMLS#9472 – Licensed by the Department of Business Oversight under the Residential Mortgage Lending Act. Equal Housing Opportunity.


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Jeanne Feenick
NextHome Premier - Basking Ridge, NJ
Basking Ridge, Warren, Bridgewater Market Expert

Great post - hopefully it will be helpful to nudge hesitant buyers to make a move!


Nov 19, 2016 12:59 AM #1
William Feela
Realtor, Whispering Pines Realty 651-674-5999 No.

It depends on if you are a positive person or one that promotes fear.

Interest needs to go up some so people trying to save can get a return and give peiople incentive to save again

Nov 19, 2016 01:42 AM #2
Dick Greenberg
New Paradigm Partners LLC - Fort Collins, CO
Northern Colorado Residential Real Estate

Hi Rob - That's a very clear analysis to put everything into the right perspective. There's uncertainty out there for sure, and we haven't seen any real impact other than rates, but it's still early days.

Nov 19, 2016 04:17 AM #3
Anna Banana Kruchten CRB, CRS, Broker
Phoenix Property Shoppe - Phoenix, AZ
Arizona's Top Banana of Real Estate!

Rob you've make it very clear to undertand. At this point we don't know for sure how much higher things will go and for now it's a small difference. Uncertainty breeds strange behavior.   If I were a home buyer I'd be making a purchase now.

Nov 19, 2016 06:01 AM #4
Kathleen Daniels
KD Realty - 408.972.1822 - San Jose, CA
San Jose Homes for Sale-Probate & Trust Specialist

Rob, the sky is not falling.  I had three buyers waiting to lock in their new construction loans and they were freaking out about the rates climbing. Thankfully they are locked now and will be closing this month. Managing emotions can be challenging.  

Nov 19, 2016 06:46 AM #5
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Rob Spinosa

Vice President of Mortgage Lending, Marin County
Can I Get a Jumbo Loan with 10% Down?
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