Interest rates remain at historic lows… but for how long?
Interest rates aren’t the most interesting thing on the planet– but they do have a direct impact on your monthly mortgage payment. This alone should make you consider what the experts are predicting for next year’s interest rates.
How Does Interest Impact Your Mortgage Payment?
Let’s look at an example—
For simplicity we will say you are looking at a $150,000 home on a 30 year fixed rate mortgage. For this example we’ll compare 3.53% and 3.93% interest rates.
$150,000 @ 3.93% Interest Rate for 30 years | Payment= $710.08 (Monthly) | Total Interest Paid= $105,629.81
$150,000 @ 3.53% Interest Rate for 30 years | Payment= $676.08 (Monthly) | Total Interest Paid= $93,389.33
Difference over the life of the mortgage= $12,240.48
That’s huge! A tiny .4% increase in interest rates can cost you $12,000 extra over the life of your mortgage. So, now that you understand the impact of interest on your mortgage payment lets dig into what the experts say.
Find out how much interest rates impact your mortgage rate with this free mortgage calculator.
What The Experts Say
Since January interest rates have fallen by .5% and has remained at 3.5% for the 11 months according to Freddie Mac’s Primary Mortgage Market Survey.
The chart below shows how far rates have fallen this year (on the left), and uses an average of the projections from Freddie Mac, Fannie Mae, the Mortgage Bankers Association and National Association of Realtors (on the right). As you can see, interest rates are projected to increase steadily over the course of the next 12 months.
How Do You Get A Low Interest Rate?
Well, buying at the right time helps, but even then it’s not a guarantee. Different lenders lend at different rates. Our recommendation? Your credit score matters a lot: The higher your credit score, the more willing lenders are to give you low interest loans.
If you have a good credit score it’s possible to get a mortgage rate up to a full percent lower than someone with poor credit. So while you definitely can’t change your credit score overnight, it’s important to try and keep it up if you are in the home buying market.
Even a small increase in interest rate can impact your family’s wealth. There is still time to take advantage of current low interest rates. If you’re thinking of buying or selling, now is the time. Interest rates will rise next year, experts are certain. Will you take advantage of the market rates climb higher?