Everyone knows that we have continued to enjoy low interest rates. For many, just how low has long been forgotten. Strike up a conversation with any of your elders and they will tell you how they remember over 9% some say even 11% interest rates. They also remember how wonderful it was when they went down to 7%. I do believe while living in other foreign countries I can remember even higher then that! What does it all mean for you.
looking at a recently drawn up graph from Dave stellin at the Lake Michigan Credit Union what it could cost you to continue to sit on the fence becomes all too clear.
It takes about $32,000 in income to qualify for a $125,000 mortgage loan. If rates move up and prices gain the same amount they did in 2015, it is estimated it will take $38,400 in annual income to get the same house 1 year later. That translates into a 20% increase in pay to go from $32,000 currently to $38,4000 in annual income. I have not seen too many people achieve a 20% increase in annual pay in one year.
So if only the house prices go up as projected you would be looking at a difference In actual monthly payment terms of a $596.77 payment at 4% to perhaps $656.45 at 5%!
If rates go up that same house would cost you a monthly payment of $596.77 at 4%. If the interest rates go up to 5% your payment goes up to $671.03.
If that same house costs you $137,500 next year your payment jumps to $656.45 at 4% or $738.13 at 5%!
We have also heard that rentals are expected to go up in our area. These are all very compelling reasons to be looking into getting off the fence and making a real estate purchase in 2016.