Rising Interest Rates Are Finally Here
I wrote a blog in May of 2013 in which I stated that interest rates were starting to rise. They are on the rise but still at historical lows. On Friday the rates were slightly over 5% with no end in sight as to how high they may rise.
What happens to your buying power when you have a loan for 6% as opposed to a rate of 3.75%?
Let’s look at a home selling for $300,000 with a 20% down payment and an interest rate of 3.75%. Your payment for PITI (principal, interest, taxes and insurance) would be approximately $1,411.73 per month. The same $300,000 home with a 20% down payment at 6% interest would cost approximately $1,739.17 per month—or an additional $327.44 per month, or $3,929.28 per year. Which amounts to $117,878.40 for the life of the loan.
Did you heed what I stated back in May, and are you one of the lucky ones who locked in at 3.75%? Or are you waiting for the interest rate to climb to 6%? If you are waiting, why? Get locked in as low as you can before rates get even higher.