Thinking about buying a home in 2019? In 2019, the biggest factor to consider is rising interest rates and their potential impact on your purchasing power. Purchasing Power is the price of the home that you can afford to buy for the budget you have available to spend. As interest rates increase, the price of the home you can afford to buy will decrease, especially if you plan to stay with a certain monthly housing budget. So, purchasing power will impact how you buy a home in 2019 – here’s what you need to know!
This chart shows the impact of rising interest rates if you planned on purchasing a home and keeping your monthly payment around between $2020 – $2044 a month. As rates rise, the value of the home you can afford decreases. At a 4.5% interest rate, a $400,000 home will result in a principal and interest payment of $2,026. If rates rise just 1% (5.5%) and you want to stay with a similar housing budget, you can now only afford a $360,000 home—a drastic difference!
Because we have been in a low interest rate market for so many years, many buyers don’t realize how the rising interest rates will affect them. In today’s market, you may have qualified to buy a $400,000 home. If rates rise 1-2%, you may now only qualify to buy a $360,000 home – that may mean you have to make tough decisions and sacrifice things like:
- The area or neighborhood you want to live
- Buying a home that already has updated kitchens or baths vs. one that needs remodeling
- Buying a 3 bedroom home vs. a 4 bedroom
Just 15 years ago, the average mortgage interest rate was 6.34% – that is a 3% jump from where we are today. With mortgage rates rising – every percentage makes a difference! Experts are projecting the trend to continue as we move through 2019. Maximize your Purchasing Power by purchasing now while rates are still lower.
Contact The Donnelly Group today and we can recommend one of our preferred lenders to get you pre-qualified now! Now is the time to buy — don’t wait!