The news has been filled with headlines about changing mortgage rates.
While they have risen since the low point in January 2021, they are still at historically low levels, which continues to create a sense of urgency for buyers who want to lock in a low rate.
Let’s take a look at how much mortgage rates change your monthly payment.
In the example above, you can see how an increase of 1% in interest rates changes your monthly mortgage payment.
If you want to keep your monthly payment for principal and interest between $1,200 and $1,250, you can afford a loan amount of $300,000 with a 2.75% interest rate. If that interest rate increases to 3.75%, the loan amount decreases to $270,000 in order to stay within your desired monthly payment.
In short, every time the mortgage rate increases, you need to look at lower-priced homes in order to stay within your budget.
Mark Fleming, Chief Economist at First American, said,
“Although they remain low, mortgage rates have begun to increase and are expected to rise further later in the year, thus affordability will test buyer demand in the months ahead and likely help slow the pace of price growth.”Mark Fleming, Chief Economist at First American
Experts predict that rates will continue to rise modestly throughout 2021. Of course, just because mortgage rates are low, doesn’t mean you should overpay for a home. If you are planning on buying, make sure you work with a real estate agent who can help you set realistic expectations while finding a home that meets your needs.
Interested in learning what today’s rates mean for you as a buyer or seller?