C H O O S E Y O U R C A T E G O R Y :

I am Looking to Sell:

VACATION RENTALS

BLOG

HOME SEARCH

ABOUT

HOME

Your trusted source for real estate information you can use.

Blogging with Bill

The information contained herein is not a guarantee of any loan availability, qualification, interest rate, or closing costs. Actual rates and fees will be quoted by your mortgage company and title company. MBI Florida Realty LLC is a Central Florida-based real estate brokerage company.

If you are thinking about buying or selling real estate in the Central Florida area,

you might want to consider acting soon.

To summarize, buying a home takes more than just looking on one of the popular sites and making offers. Having a strategic understanding of all factors involved gives you an advantage and peace of mind. Having a professional Realtor on your side is the way to make your homeownership dreams come true.

If you are thinking about buying or selling real estate in the Central Florida area, you might want to consider acting soon. Contact us at MBI Florida Realty by clicking here.

Have You Ever Wondered What Impact Interest Rates Have On You?

ARTICLE | OCTOBER 1, 2021

Contact MBI Florida Realty Today

A Brief History Lesson

The Answer Might Surprise You

So What Does This All Mean?

Payments go up pretty fast as interest rates rise. Here is another example.

Keeping 5% as an example, if rates went up tomorrow, P & I payments on a $300,000 loan would be the same as they are on a $440,000 loan at today’s rates.

If 5% sounds incredibly high, check out the next chart to see the bigger picture. Take a look at interest rates reported by Freddie Mac for the last 48 years. Does 5% still seem high?

Rates actually pushed up to above 9% in 2000 but they have been on the decline since. Many homebuyers today have no idea how great the interest rates are right now.

Mortgage payments consist of the principal and interest (which pay back your loan), mortgage insurance (for loans with less than 20% down), property taxes, insurance, and, (if applicable) homeowners association and CDD payments.

The chart below shows what happens to principal and interest payments when interest rates increase. The chart lines are for loan amounts at the listed interest rates.

Let’s say you’re in the market shopping for a home right now. You have qualified for a loan at 2%. You see that the prices are higher than they have been before. You think that waiting may be the right strategy.

You’re right. Prices are high. But now you are hearing noise about interest rates. Inflation is starting to become a topic on the news. There are murmurs about the FED raising rates in early 2022. But rates have been low for a long time. So, what happens when rates go up?

What if interest rates went up just a little? If you were considering buying a home for $400,000 today with 20% down, at a 2% interest rate, and the rate increased to 5% before you put in your offer, your P&I payment just went up by about $535.00 per month. Also, your buying power just dropped by 30%.

If you think the answer is to negotiate a lower sales price so you still qualify or so you can keep the same payment, the seller would need to drop the price by $125,000 to $275,000. likely? Probably not.

For the past 20 years, interest rates have steadily declined. Many homebuyers today don’t remember the days when we hoped and prayed for rates to go down to the 7% range. So, now that there are concerns about inflation and interest rates rising in the beginning of 2022, let’s take a let’s take a look back at the annual interest rates for the last 20 years, then look at what happens when interest rates rise.

How Will Future Home Prices Be Affected by Rising Interest Rates?

Schedule a Consultation or Select the Reports and Guides You Would Like to Receive

I'd Like a ConsultationI'd Like a FREE Market ReportI'd Like a FREE Property History ReportI'd Like a FREE CMA ReportI'd Like a FREE Home Marketing GuideI Need Mortgage Services