Want to know how important your interest rate is on your purchasing power?? Well check this out! Don’t worry about the purchase price. Stay on top of your interest rate. .5% will make a huge difference on your monthly payment and what you end up paying over your loan period.
How Much Do You Lose in Sales Price With Each .50% Interest Rate Hike?
Let’s now compare that home at $240,000 if rates went up 1/2 point and you wanted to keep your payment the same. The amortization of most mortgages is for 30 years.
- $240,000 x 80% at 4.5% interest equals a payment of $972.84
- $226,260 X 80% at 5.0% interest equals a payment of $971.65
- $214,062 X 80% at 5.5% interest equals a payment of $972.34
- $202,500 X 80% at 6.0% interest equals a payment of $971.27
- $192,188 X 80% at 6.5% interest equals a payment of $971.80
You can see that a 2% increase in an interest rate would lose you about $50,000 of purchasing power in this price range. If you doubled the sales price, you would lose about 100,000 of purchasing power for a 2% spread in interest.
This is why interest rates play a huge factor for many first-time home buyers. If you are stretched too close to the top end of your price point and rates go up, you might not be able to buy that dream home you want because you will no longer qualify for that sales price. And, just so you know, making a lowball offer is not always the answer.
Call me today so I can give you a private tour and show you the inside of all the homes for sale that meet your criteria in Washington County in less than two hours! I can show you any home for sale in the St George area listed by any company anywhere in the city. Then you don’t have to keep searching for open houses on the weekend. We can go anytime you want. Let’s get you out there.
Contact me and I can help get you fully qualified because when you find that perfect home in southern Utah you will want to be ready to write the offer on your new home. You do not want to lose your dream home because someone had a strong qualification letter from their lender showing that they are capable of purchasing the home. Contact me and I can help direct you to the lender that will do the best job for your particular situation.