One key factor in buying a home is getting the mortgage to pay for the property. Many home buyers need to finance their purchase, so they turn to mortgage lenders for help. During this process, your income and credit history will have an impact on the size of the loan and the interest rate that is offered. This article discusses What Happens to a Real Estate Buying Power when Interest Rates Go Up?
Real Estate Buying Power
In recent years, buyers have been able to leverage their mortgage approval to buy nicer homes. Interest rates have been low, which means that more of the mortgage payment can go directly to the cost of the home. When a homeowner doesn’t have to pay as much in interest costs, then they have the ability to put a higher percentage of their monthly payments towards the principle of the loan.
If you are buying a home, then your goal should be to minimize interest rates as much as possible. A lower interest rate can help you save thousands of dollars in interest costs over the years. These savings can add up over the course of a 30-year loan.
How Interest Rates Impact Home Prices
In addition to impacting your monthly payment, interest rates also have a direct effect on housing prices. Higher interest rates will leave a lasting impact on homeowners, making it harder for the average home buyer to purchase higher-priced homes.
When the interest costs are higher, it increases the monthly payment amount. As a result, buyers need to choose lower-priced homes so that they can afford the monthly payments. This phenomenon has a domino effect on the real estate market. Supply and demand may cause the real estate prices to decrease since there aren’t as many qualified buyers for the higher-priced properties.
Interest Rate Trends for the Real Estate Market
When the economy is weak, then it is common for the interest rates to drop. As the economy gets stronger, then those rates can start to increase again. Right now, it is anticipated that we will see higher interest rates in the future because the real estate market has bounced back from the dips that occurred over the past eight years.
So, what does this mean for home buyers and sellers? If you are thinking about buying or selling a home, then you might have better results by taking action as soon as possible. Closing the transaction before interest rate costs go up will increase the likelihood that you will have success with your home. An experienced real estate agent can assist with this process, to make it easy for you to connect with the right buyer or seller.
At DUFFY Realty we work hard to keep up with the changing trends in the real estate market. Our team is experienced with all types of real estate. We are here to help you find the home of your dreams. Call us right away at: (678) 318-1700