How Housing Interest Rates Can Affect When to Buy a House

How Housing Interest Rates Affect Your Monthly Payment

Housing interest rates do have an effect on your monthly house payment, just like the amount of your down payment. Having a higher interest rate versus a lower interest rate can make a difference in the amount that you pay every month, but what is the real difference?

Let’s take the example of a $500,000 home. If you put down 20%, which is $100,000 and your interest rate is 4%, this means that you pay around $1900 in principal and interest every month. If your interest rate is 2%, you pay around $1475 in principal and interest, according to Investopedia. Having a lower interest rate can save you $425 per month in this example!

But should higher interest rates prevent you from buying a house? What if the market continues to increase? Will that price you out of being able to afford a home at their current prices? Let’s explore.

Should You Wait to Buy a Home Based on Housing Interest Rates?

Like many things in life, interest rates are unpredictable. We never know what is coming around the corner, and while many people trust interest rate predictions, they are not a guarantee. If you are able to get a low interest rate, great! However, if interest rates are high but you feel that this is the time for you to buy a house, don’t fret.

There are different solutions for lowering your interest rate in the future. As interest rates decrease, you could choose to refinance. Similar to interest rates, it is difficult to predict when housing prices will increase and decrease. If you can currently afford a home but interest rates are high, you can always refinance at a later date.

Don’t let high interest rates prevent you from buying a house, but do take these into consideration when looking at the overall home buying process.

Conclusion

There is do doubt that interest rates have a major effect on your monthly payment. The higher the price of the home and the higher the interest rate, the more you pay per month. However, just because interest rates are high does not mean that you should stop yourself from buying

You never know what will happen with housing prices and interest rates, and you would not want to wait and then have prices and interest rates go up even more.