How do interest rates affect my payment?
At the time, we are cutting this video; the interest rates are rising but are still some of the lowest I have seen in my entire life. They are running between 4.25 and 5% for a 30 year fix. What is happening is that clients are buying a home and locking themselves in at the low rate. What you are going to be seeing down the road, the reason you want to buy an investment property, you may want to stay in for a while. When interest rates climb to 6-7%, and they eventually will, you will be shocked when you look at the payment difference. You are going to be in a $200,000 home with a 4.25% mortgage and you would like to buy a $300,000 home with a 7% mortgage.
When you look at your payment and you are going to almost have a heart attack, as to how many times greater that payment is, and you are going to say, “Oh, we won’t buy it.” Interest rates have a huge effect on what you are paying for property. It affects what you are paying for money over the length of the loan and whether or not you are going to be able to buy into a bigger home. What we are recommending to our clients right now is that if they are in a home, they need to refinance and get into a lower rate. If they are looking for a home to buy, buy something that they might think is going to last them for quite a few years (10+years). An average person moves about every 7 years. My prediction is that with interest rates so low people will be paying off their homes. People are going to look to move up down the road, which is pretty typical. People get anxious to do something a little different but they are going to look at the payment difference and they are going to stay put. When you are looking for a home, look at something that you can grow into. Lock in those lower interest rates and you are going to be extremely happy down the road when interest rates climb and you are locked in an incredible good rate.