By: Kelly Smith, Marketing Director
No one predicted interest rates would fall below 4% this year. Rates were expected to rise all year, reaching or surpassing 5% by the end of 2017. In the last month, however, rates have held just under 4% for 30-year fixed conventional loans.
Let’s see how the rise in interest rates could affect the mortgage payment on a typical $250,000 home. Let’s assume the buyer is putting 20% down ($50,000), essentially borrowing $200,000 @ today’s rate of 3.875% would be $1,195/month. Taking only the interest rate into consideration, compare that payment to a forecasted rate of 5% in 2018 and payment increases to $1,328, a difference of $133/month. Now, consider that home prices could appreciate as forecasted by Core Logic in Montana by as much as 5.8% year-over-year and the cost of waiting to buy that same home next year could cost you $206 more per month than buying today.
If you’re in the market for your first home or are pondering whether now is a good time to buy your dream home, consider the cost of waiting. Use a mortgage calculator to play out different scenarios. I used the Zillow Mortgage App to make the calculations in the above example. Use the payment calculator to determine what your monthly payment would be given the cost of the purchase price, your down payment, and interest rate. You can even click on Advanced to insert estimate property taxes, estimate homeowners’ insurance, and any applicable HOA fees or PMI (private mortgage insurance) if your down payment is less than 20%.
Interest rates for each individual will vary based on credit and other factors so it’s best to rely on your lender for exact payment calculations, but to give you an idea, this is a great tool for comparison on monthly payments.
You can also use the affordability calculator on the app to determine how much house you can afford. Insert your income/year, your possible down payment, total monthly debt and the current interest rate to determine the maximum price range you should look at when shopping for a home.
Mortgage calculators are very helpful when you’re in the early stages of the home buying process and are wanting to make general comparisons or determine a price range. Your lender will be able to factor in your credit scores, debt-to-equity ratio and how much you are comfortable spending on your house payment each month to give you a more specific idea of affordability. See our preferred lender program for our lender recommendation.
Our new home specialists, Shane and Taylor, are also here to help you navigate the home buying process. If it feels overwhelming or confusing, know that you have guides on our team who you can ask any question to and share any concern with. Our mission is to help you feel confident with your home purchase, whether it’s with us or not.