The United States Federal Reserve just raised interest rates by a quarter of percent. How does raising the rates affect a home loan?
This is the first time since 2006 that an increase has been made to interest rates. In an effort to head back towards the direction of normalization in the economy, the feds raised the interest rate a nominal amount.This increase should help strengthen the US dollar. However, it could cause some ripple effects across world. Overall this shows the Federal Reserve perceives the US economy as strengthening. A planned gradual increase will continue until 2018, when normal levels are reached of 3.5%.
What does that mean for someone looking to buy a home? Interest rates went up for a home loan mortgage. Right now it doesn’t seem like a significant change, but if The Fed continues to raise rates throughout next year by a quarter of percent then we are looking at a big jump in one’s monthly mortgage payment by the end of 2016. If you are thinking about buying a home in 2016, make it a priority and lock in a low interest rate while you still can. Find out what you can get pre-approved for and start looking for a home!
Take a look at the example below to see the difference in your monthly payment with an increase in rates. You are paying an additional $170 per month!
$300,000 Home Price at 4.1% (Current Rate) = $1,702 Monthly Payment
$300,000 Home Price at 5.1% = $1,872 Monthly Payment
(These figures are based on a 5% down payment and 30 year fixed mortgage.)
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