How Rising Interest Rates Affect Your Buying Power

Real Estate

As you probably know, after historic lows over the past few years, interest rates are now rising. There have been predictions of 3 or more rate hikes this year, as well as additional hikes in 2019.

What does that mean for home buyers?

As mortgage interest rates rise, home buying power decreases.

Why? 

The higher the interest rate, the less money the lender will risk lending you.

For example, let's say your current financial situation affords you the opportunity to make a payment that amounts to $2,500 per month (for principal and interest).

Here's what your buying power would be for interest rates ranging from 3.25% to 5.25%. 

Purchasing Power 2500

You would qualify for $120,000+ more money if you were borrowing at a 3.25% interest rate vs. a 5.25% interest.

 

Now let's review the scenario for a buyer who qualifies for a $3,500 principal/interest monthly payment.

PurchasingPower3500

As you can see, your interest rate can make a HUGE difference in your buying power!

Have questions?  Reach out to me to me or contact one of my preferred lenders, Zac (contact info below). 

Graphs provided courtesy of:

ZACHARY GAYNOR | Senior Mortgage Loan Officer | Home Loans Division
NMLS: 378781 
Central Pacific Bank
6 Hoolai Street Kailua, HI  96734
Phone: (808) 927-8231 | Fax: (808) 544-5962 
zachary.gaynor@centralpacificbank.com | centralpacificbank.com