Families looking for a new home should pay close attention to the cost of today’s rising interest rates. Mortgage rates are already the highest in over a decade.
The Federal Reserve’s decision to raise interest rates by half a percentage point will not immediately affect mortgage rates, as it does with credit cards or auto loans. But you can expect an increase soon.
Experts say the longer you wait to close a deal on a new home, the more your buying power diminishes.
Erin Calabritto is counting the days until she can close a house in Angier for herself and her son. She’s been looking for homes to sell for the past six months, and with every week that’s been bought, mortgage rates have gone up.
“It’s not an era of house hunters, where you have a lot of choice and a lot of time to make a decision,” she said.
She worked with Sherry Riano’s team to get a “mortgage refresh” every time that rate went up.
“If you were prequalified 6 months ago and you’re still in the market, you were preapproved at 3%. Now we’re at 5.5%. So you want to make sure you get paid,” a said Sherry Riano, a mortgage lender.
Take a look at how much more that monthly mortgage payment is today on a median priced home in the Triangle with 20% down payment.
You would take out a loan of $320,000. At 2.98% a year ago, the monthly payment was $1,756.
That’s $2,227 at the current rate of 5.5%, or $471 more each month.
And over time, that interest adds up. A buyer last year will pay nearly $62,000 over 7 years. Today’s buyer is paying nearly $117,000 in interest at the higher mortgage rate.
“If we see a difference in interest rates that go up half a point on a mortgage side, you’re talking about an additional $100 a month in your mortgage payment,” Riano said.
Riano tells Triangle buyers not to be scared off by rising mortgage rates.
“We’re still at an all-time low, even at 5.5%,” she said. “It’s an incredible time with the appreciation of our market and these feed-in prices.”