While there’s no guarantee that 2017 will bring a spike in interest rates, if owning a home in the New Year is on your bucket list, don’t wait. Historically rates tend to fluctuate and if you find yourself facing even a minimal increase, that translates to real money out of your monthly budget.
Here’s How It Works
A one percentage point increase may not sound like much, but that translates into an additional $175 a month on a typical payment for a $295,000 home. Likewise, when rates go up, so do the requirements to qualify for a loan. If you chose to purchase a home for $250,000, and interest rates go up by just 1/4 of one percent (.25%), you will need to earn an additional three percent in income to qualify for the same $250,000 house! If you don’t expect your income to go up by 3%, then you must purchase a home priced 3% less.
What Would You Rather Pay For?
Using our example above, let’s consider the long-term cost of purchasing that $295,000 home under rates just 1% higher than today. $175 additional per month times 12 months = $2,100 per year. Over the lifetime of a typical 30-year mortgage, that 1% will cost you $63,000.00.
In example 2, you’d need to take around $8,000 to account for the 3% difference. That means your budget goes from $250,000 to $242,000. Cutting $8,000 could easily equate to giving up a third bedroom, finished basement or 2-car garage.
It’s Not Too Late!
Though 2016 is fast coming to an end, it’s not too late to purchase a beautiful new home and avoid the risks of increase. All you need to do is choose from our incredible selection of move-in ready homes or meet with a Daybreak builder. Putting your dream “under contract” will secure the current rate for the full term of your loan if you chose a quick move in home that can close before rates increase again.
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