No matter the economic climate, here’s what you need to know about interest rate trends in order to make the best decision about buying a house.
What interest rates mean for your home loan payments
Interest rates matter because they impact your mortgage payments. The higher the rate, the more you’ll pay over time — and each month. You can track rates daily to see how frequently they change.
Low rates can make you feel like you need to rush out to buy a house before rates rise. It’s true that higher interest rates impact how much home you can afford: The higher your interest rate, the more your monthly payment will be.
What happens if rates continue to go up?
If rates rise, you’ll pay more on the same mortgage than you would if you bought with a lower rate. But if you can adjust your homebuying budget and look for a less-expensive home, you can reduce the impact of the interest rate and offset the cost of a higher percentage.
Purchasing a lower-cost home can reduce your monthly mortgage payment — even if interest rates rise. This puts more control in your hands, rather than reacting to interest rate trends or predictions about what the economy will do next. You can also use a mortgage calculator to determine how different rates will affect your particular payment.
Let your personal financial situation guide your decision-making
Ultimately, no one can predict what interest rates will do this year or in the future. We can expect that they’ll change, but we don’t know exactly how.
Buying just to take advantage of an interest rate doesn’t make sense when it comes to buying a home. It’s far more important to save for a down payment and to ensure your cash flow can handle a mortgage payment, homeowners insurance and taxes, and all the other costs that come with owning and maintaining a home.
On the other hand, if buying a home is a priority for you, buying now might make sense. You can still take advantage of lower rates as long as you feel prepared to handle the monthly mortgage payments and the responsibilities that come with homeownership.