It Will Cost You More to Buy A Home
The housing market topped a new threshold over the past week. Buoyed by a strong economy and a series of interest rate increases by the Federal Reserve, thirty-year fixed mortgage interest rates reached 4.61% – the highest number since May of 2011.
Rates crossed the 4% threshold in the week of January 11 and they have been on a relatively steady rise since then. If this pace continues, we’ll hit 5% before the year is out.
Should rising interest rates deter you from buying a home? Not necessarily, but it may cause you to re-think your definition of an affordable home.
How Much More?
To see the effect of higher interest rates, consider this example. Let’s assume you’re buying a $200,000 house with a 20% down payment. Your monthly principal and interest payment will be $764 at 4% interest, $821 at the current 4.61%, and $859 at 5%. For the $160,000 you are borrowing, the difference between 4% an…