Monday, September 26, 2016 / by David Veenstra
Kalamazoo Real Estate - So we are pretty certain that it’s not “if” the mortgage rate goes up but “when” the rate goes up and a rising mortgage rate will make a big difference for greater Kalamazoo/Portage buyers. Freddie Mac predicts that mortgage rates will be at 4.5% a year from now.
If buyers can afford a home with higher interest rates, it means higher payments. Higher payments might mean they won’t have the money to spend on other things like furniture or improvements to the home or an unrelated purchase like a new car.
GREAT RULE OF THUMB TO REMEMBER FOR MORTGAGE RATE INCREASES
When the rate moves 0.50% on a $250,000, the payment goes up by $70.66 a month. If it moves 1.00%, the payment goes up by $143.74 per month, each and every month for the entire term of the mortgage which means paying over $50,000 more for the house.
The question facing every borrower in this situation is “How will you feel about having to pay more to live in the same house because you were not ready to commit?”
Some borrowers are absolutely maxed out as to what they can qualify for and some borrowers have set their budget with a certain limit even if they can afford to pay more. We respect people who live by their budget and recommend that everyone decide on the house they can afford based on their budget and not what the lender will loan them. However there are implications which are important to be aware of. A borrower who is not able or willing to change their monthly payment when interest rates increase will have to make a larger down payment. In the same example, a 0.50% increase in rate, while keeping the monthly mortgage rate the same would require $14,873 more in down payment. That could make the purchase impossible or it may require that the buyer buy a lower priced home that will not have the same amenities.
Mortgage rates have been low for so long that some people believe they will always be so. There are some economists who believe that the economy will not be strong again until mortgage rates are in the 7% range.
If you are able to purchase now, or if you are wondering if this is a good time to sell and move up or sell and make the move to a simpler lifestyle to better meet your needs, give us a call. We specialize in providing the advice and information you need to make wise decisions for yourself and your family. If you own a home, we are happy to do a completely free professional evaluation that will tell you what your home is worth in today's market. That will help you determine whether selling now and moving up makes financial sense now, or perhaps it will help you make a tentative plan and/or make changes to your budget so that you can take action in 6 months or a year.
We provide the tools, advice and guidance help greater Kalamazoo home buyers and sellers make wise financial real estate decisions.
USE OUR MORTGAGE RATE INCREASE CALCULATOR
Here is one of the tools that can be helpful as you consider your options and the impact of Kalamazoo mortgage rate increases. Go to the "If the Rate Goes Up" calculator.
LET THE VEENSTRA TEAM HELP YOU GET AND UNDERSTAND THE INFORMATION YOU NEED TO MAKE THE BEST REAL ESTATE DECISIONS
We are always happy to provide free consultations to greater Kalamazoo and greater Grand Rapids home buyers and sellers. We want you to know and understand your real estate options. You can reach The Veenstra Team at 269-350-5514 or contact us here.