Increased Mortgage Rates Affecting The Home Purchase

Dated: 05/25/2018

Views: 939

We have seen mortgage rates rise sharply as Bankrate’s benchmark 30-year mortgage rate is currently at 4.78%. This is the highest level since July 2011. In March 2018, rates averaged just 4.54%. 


For an $800,000 home purchase with a 20% down payment, that mortgage payment just increased $92/month with an additional cost of $33,160 in interest over 30 years.


If the purchaser is unable to qualify with the increased monthly mortgage payments their purchasing power will greatly diminish.


For a greater perspective, in 2017 when rates were 3.875% the purchaser’s payments would have been $3,010/month for a house purchase of $800,000 with 20% down payment.


As Mortgage Rates increase the purchaser’s ability decreases as we keep the mortgage payments around $3,010 with a 20% down payment.


Home Purchase Limit        Mortgage Amount        Rate            Monthly Mortgage Payment
                $800,000                          $640,000                3.875%                        $3,010
                $788,000                          $630,000                4.0%                            $3,008
                $770,000                          $612,000                4.25%                          $3,011
                $740,000                          $592,000                4.50%                          $3,000
                $720,000                          $576,000                4.75%                          $3,005
                $700,000                          $560,000                5%                                $3,006

If the rate continues moves from 4% to 5% the buyer will have lost approx $100,000 in buying power and can no longer afford the home. 


What does this mean for Purchasers?

Strongly consider making the purchase now before the rates continue to rise which will either cost you more and potentially price you out of your dream home. Consult your trusted buyer’s agent for further advice.


What does this mean for Sellers?

With mortgage rates increasing the buyer pool diminishes which can also be detrimental on sale prices.  Offers should be strongly considered with the future uncertainty of the mortgage rates in mind. Consult your trusted listing agent for clarification. 


About The Legaz Team 

Nancy & David Legaz of The Legaz Team have been selling real estate since 1995 - selling a home every 5 days with their team of trusted buyer agents and listing specialists. If you are thinking about selling call us for a complementary market analysis and if you are ready to purchase allow us to represent you!


Call 718-475-2800

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