The Effect of Interest Rates on Buying Power

Aside from the tax credit that expires on April 30th, another incentive to buy now is the fact that while interest rates remain at historic lows that is about to change. If interest rates rise it makes your cost of ownership higher and may even price you out of certain price brackets. Bottom line, your cost to own the same home is higher and you may be forced to buy less home.

If you are trying to time the market for the "best" deal, you may be missing out. For every quarter-point increase in the interest rate, it will cost you $6,000 more for every $100,000 borrowed. On a $200,000 loan, it will cost you $50,000 per point. Any savings you may realize from a drop in home prices can easily evaporate as rates rise.

Analysts and forecasters are predicting that we will soon rise from the 5% level into 6% range by year's end. Some are even predicting rates will go as high as 7%. For those who bought a home in the 1980's or early 90's (remember when 9% seemed like a great deal?), these rates may still seem low but the effect of $50,000 or $100,000 additional cost on your loan is substantial.

If you're waiting for the economy to get better, if you're waiting for the media to tell you that we've turned the corner, if you're thinking that all of the mortgage money has dried up....you may be missing out! Although we're at roughly 10% unemployment, 90% of Americans are working. When the media tells you we've turned the corner, it may be too late....interest rates will have risen dramatically by that point. And contrary to what you may read/hear, there is still mortgage money available. Just talk to one of our partners! In the Rochester region, over 1800 individuals and families have purchased homes since January 1st and most with financing.

Don't delay....and if you can get in under the April 30th deadline, there's up to 8,000 more reasons to buy a home today! Contact a Nothnagle agent today to get started.