Last Friday, October’s employment report came out reveling strong job creation, a decline in the unemployment rate and a rising of the average hourly earnings all of which indicate strength in the jobs market. How does this affect mortgage interest rates? With these signs of economic recovery the likelihood of a Fed Funds rate hike in December is greatly increased. Learn how much house a rate hike will cost you below.
Right now, a 30-year fixed rate mortgage with a 10% down payment on a $350,000 home at 4% will cost you $1,503.86/month plus taxes, homeowner’s insurance and PMI (Private Mortgage Insurance). That very same 30-year fixed rate mortgage with 10% down at 4.5% will cost you $1,596.06/month. That’s an extra $92.20/month and $33,191.54 over the 30-year life of your mortgage. If rates climb to 5% the incremental cost jumps to $184.40/month and $66,383.08 over 30 years.
Higher interest rates can also mean that some consumers may be forced to make a downward adjustment in their target price range. I spoke with Debbie Lansing, a realtor with Keller Williams in Montclair, NJ, and she cited real estate appraisal valuation guru Jeffrey Otteau, offering that “each 1% increase in interest rates translates to a 9% drop in the price of the house you can afford.”
That would mean that a 10% down, $350,000 mortgage to buy a $389,000 house would downwardly adjust affordability-wise, to a $315,900 mortgage and a $351,000 purchase price.
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SRC: Learn more about How Much House a Rate Hike Will Cost You at: www.forbes.com/sites/markgreene/2015/11/08/how-much-house-will-a-rate-hike-cost-you/