In the Tri-Cities, the median home sales price has increased between 7-10 percent over the past year. Meanwhile, over that same time period, interest rates have remained near historic lows. Together, this has let a lot of buyers enter the market and lock in low rates.
If you’re selling your home, you’ll probably be most concerned about short-term price — i.e., where home values are headed over the next six months. As a buyer, though, you should be more concerned about the long-term cost of the home rather than the short-term price.
The long-term cost of a home is impacted significantly by your mortgage. The Mortgage Bankers Association (MBA), Freddie Mac, and Fannie Mae all forecast that mortgage interest rates will increase by this time next year.
What Does This Mean as a Buyer?
According to CoreLogic’s most recent Home Price Insights Report, home prices will appreciate by 4.8 percent over the next year. If that happens, here’s a simple demonstration of the impact that an interest rate increase would have on the mortgage payment of a home selling for approximately $250,000 today:
As you can see above, a change of 0.5 percent in interest rates can add almost $150 per month to your payment on a $250,000 home. And when you look at it over 30 years, we’re talking more than $50,000 extra out of your pockets because you bought after interest rates went up. If you’re buying a more expensive home, all of those numbers go up, too.
If buying a home is in your plan, doing it sooner rather than later could save you tens of thousands of dollars over the terms of your loan.