Increase in Interest Rates

The Federal Reserve has increased the interest rate for the first time in almost a decade by .25%.  The Federal Open Market Committee voted unanimously on this measure as the belief is the economy is recovering, but states “it still has a long way to go.”  No, it’s not time to panic or worry- interest rates are heading back to the 11% interest rate days.

So how does this affect the housing market with regards to interest rates?  If the interest rate on a $200,000 home was 4.25% and increased to 4.50%, it would mean an increase of principal and interest of $29.49/month.  Not a huge increase, but an increase all the same.  These rates are still so much better than in earlier years when the real estate market was tickled to death at an 8% interest rate!

So what does the future hold for these interest rates?  It’s anyone’s guess.  Even the experts on Wall Street and financial advisers don’t always agree.  We all hope the economy will continue to improve.  And as it prayerfully does, we probably can expect to see these modest increases in interest rates.

What I can tell you is that if you are thinking about purchasing a home or property, it would be a time to check out all your options.  It’s just dollars and sense.  Much like shopping when things are on sale vs. paying full retail value.  Money is available for financing and at good rates, so it’s just taking advantage while those rates are still historically low which would save you money down the road.

Another advantage is to look at what your current interest rate is on your home mortgage.  If your rate is higher than 5.5% interest on your current loan, reach out to your lender to see if there are options for you to refinance your home.  There will be some closing cost, but it may save you money at the end of the day.  I mentioned earlier about that .25% interest rate increase…calculated over that 30 years, it’s an increase of $10,616.40.   So if you can reduce your interest rate, it’s just more money in your pocket.

For those of you that are first time home buyers and are renting, it’s a good time to see if you qualify for a home mortgage.  Many times what you are paying in rent is more than you would for a mortgage.  Finance experts will tell you that owning a home is the first step in creating wealth, plus the tax benefits on the interest charged on your mortgage.

I hope this information has been helpful in assisting you navigate thru the roller coaster ride of how interest rates affect the mortgage industry.  Nothing is constant but change!

Dee Brabham
Texas Land Group

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