Posted by Kimberly Rexroat on Friday, December 17, 2021 at 1:25 PMBy Kimberly Rexroat / December 17, 2021Comment
Why the Mortgage Rates Matter
We hear it all the time…buyers get stuck on only the sticker price of a house. With the rising prices in today's market it can be hard not to! However, what we suggest for buyers is looking at the mortgage rates. That’s right! We’re here to tell you that you should buy when the rates are low, not the house prices.
Let’s start off by clearing up exactly what your mortgage rate is. The bottom line is that a mortgage rate is the interest rate charged on the mortgage. A couple different examples are fixed rates or variable rates. The fixed rate stays the same for the duration of the mortgage. A variable rate is just that; a variable. It adjusts over time based on a benchmark or reference rate.
Now, why should you be focusing on buying when mortgage rates are low instead of housing prices? Buying a less expensive home with a higher mortgage rate means that you will be paying more in interest just to have the mortgage. Buying a more expensive home with a lower rate means you will be paying less interest and more towards the actual cost of the home. Here’s a visual comparison to break it down.
It lowers your monthly payment and means you can afford more house for a lower monthly payment than buying a less expensive house, less HOME, with a larger interest rate. That $50,000 increase is the difference between these potential items:
More square footage
Rates reached an all time low at below 2% for mortgage rates. Before the pandemic rates were nearly double, sitting right around four percent. With the economy beginning to recover, those rates are going to keep increasing back to what they were pre-pandemic. If you aren’t sure what you’re pre-approved for or what your mortgage rate would be, we have a great resource tool as a starting point.
If you’re viewing the housing market in a whole new way now, do a quick search to see what is available in your area! If you have any questions about where to start, or want more insight in the direction the mortgage rates are going, fill out our contact form below!
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