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Reyne Stapelmann: The Effects of Higher Interest Rates on Home Loans

Leslie Appleton-Young, chief economist with the California Association of Realtors, spoke at the Real Estate & Economic Review & Forecast this past Thursday at the Fess Parker DoubleTree.

After reviewing an analysis of the current real estate market data, she spoke about the future forecast. She said many economists are predicting that, by the end of this year, there will be a slight rise in interest rates.

Let’s take a look at what that could mean for homebuyers.

If one were to purchase a condo for $450,000 with a 30-year fixed rate loan and put 20 percent down, the monthly payment for a loan amount of $360,000 with a 3.75 percent interest rate would be $1,667.22. With a 4.75 percent interest rate, the payment would jump to $1,877.93 and with a 5.75 percent interest rate it would be $2,100.86.

Let’s take a look at a home purchase of $700,000, also with a 30-year fixed rate loan and 20 percent down. The monthly payment for a loan amount of $560,000 with a 3.75 percent interest rate would be $2,593.45. With a 4.75 percent interest rate, it would jump to $2,921.23 and with a 5.75 percent interest rate it would be $3,268.01.

These differences can be significant, especially for first-time homebuyers. After seeing the effect rising interest rates can have, it is clear that serious buyers should try to take advantage of the current interest rates before they begin to rise.

For buyers who need assistance with the down payment, the California Association of Realtors has a down payment resource directory that shows which programs are available for your targeted real estate area.

Go to downpayment.car.org and enter either a specific property address or the area in which you are looking to buy.

Reyne Stapelmann is a broker associate with Berkshire Hathaway Home Services, California Properties and the 2015 president of the Santa Barbara Association of Realtors. Contact her at [email protected] or 805.705.4353. The opinions expressed are her own.

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