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Interest rate hikes may come sooner than you think

As in, this month. Yep. We’ve been hearing this for a while now (years!) but Inman News, the top-rated real estate news site on the Web, lays out a case for why this time it may actually happen — check it out…


So what does that mean for the local real estate market??? Well, it COULD mean that things will heat up even more, as buyers scramble to secure a new home while they can still lock in lower rates. OR… it could have the opposite effect if buyers believe the situation is temporary and decide to try to wait out the higher rates. Ultimately though, even if rates do go up, it will likely only be by a quarter point or so, and they will still be low by historic standards, so things will likely get back to normal — if that word can be applied to our market — in not too much time.

But if you are a buyer looking for a place, it’s good to keep an eye on what is happening with rates and how that will impact your buying power and monthly mortgage payments. A couple examples:

  1. If you are putting 20% down on a $500k home, at 3.75% (a typical recent rate) your monthly principal + interest payment would be $1,852. At 4%, your payment would be $1910 — only $60 but hey, it could be a week’s worth of groceries. Another way to look at it is that if your lender has approved you to max out at a monthly payment of $1,852, at a 4% interest rate the most you’d be able to finance is $387,000, compared to $400,000 at 3.75%, so you might not be able to buy that $500,000 home at all!

  2. If you are putting 20% down on a $1M home, at 3.75% your monthly principal + interest payment would be $3,705. At 4%, $3,819 — more than $100 extra. And again, if your maximum monthly payment is $3,705, the most you could finance would be $776,000 instead of $800,000 at 3.75%.

Of course, as I always say, it’s impossible (and crazy) to try to time the market, and you have to buy and sell when the time is right for you, given your particular circumstances. So carry on…

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