What a 0.5% Interest Rate Hike Means to Your Buying Power

Jason Delatte with Keller Williams Realty Bayou Partners

When interest rates go up by even just a fraction of a percent, it can affect your ability to buy a home by tens of thousands of dollars.

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If you're looking to buy a home, how does a rise in interest rates actually affect you?

Interest rates for homes loans are currently hovering at about 4%, but that might not necessarily be the interest rate you get. The interest rate you get for a home loan is determined by your credit score, income, and debt-to-income ratio.

For example's sake, though, let's say your interest rate is 4% and your lender has approved you for a $250,000 loan. Every 0.5% increase in interest rates means you lose 10% of your buying power.

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Every 0.5% increase in interest rates means you lose 10% of your buying power.

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What does that mean, exactly?

In our example, where you are approved for a $250,000 loan and the interest rate increased from 4% to 4.5%, you would then only be approved for a $225,000 loan. That's a significant decrease for such a small rise in interest rate.

As a homebuyer, it's important to grasp how rate fluctuations can impact your buying power. If you're looking to buy your dream home, now is the time to move while interest rates are so low. I'm here to help.

If you're thinking of entering the market or have any other questions, don't hesitate to give me a call or send me an email soon.