With Interest Rates Going Up, Prices are Coming Down... or are they?

As interest rates rise, you may notice house prices seem to be stabilizing or coming down. Generally speaking, for every 1% increase in interest rates, home prices fall by 10%. 

Is this actually true? 

Not exactly - but here is a conversation that can shed a bit of light on this interesting phenomenon.  

Despite buying a “cheaper” home, a 1% increase in interest rates costs you much more than the 10% you’re saving on the price. 

Look at these examples from The Truth About Mortgage:

==?

Scenario 1: 

?Sales price: $400,000

Loan amount: $320,000 (20% down payment = $80,000)

Mortgage rate: 3%

Mortgage payment: $1,349.13

Mortgage term: 30 yrs

Total interest paid: $165,686.80

Scenario 2: 

?Sales price: $360,000

Loan amount: $288,000 (20% down payment = $72,000)

Mortgage rate: 4%

Mortgage payment: $1,374.96

Mortgage term: 30 yrs

Total interest paid: $206,985.60?

==

Translation: Scenario 2 costs you $41,298.80 more! 

That’s the bad news. And imagine the difference when the homes are selling for a million dollars or more. 

The good news? 

A creative broker can actually save you in long-term interest costs AND monthly payment.

For example, one of our strategies is having the seller contribute the “price reduction” as a seller credit to the buyer's lender to “buy” the rate down. 

The result? 

You save in long-term interest costs AND monthly payment. And the seller gets the same amount they would if they lowered the price 10%. 

There are many ways to get a good deal done (even as interest rates soar). 

Want to get the best deal possible? 

Give us a call at 949-229-2208. We don’t charge anything for your initial consultation. 

We’ll walk you through all your options and help you make the smartest financial decision possible. 

P.S. If we exceeded your expectations in the past, it would mean the world to us if you left us a glowing review on our Google My Business page. 

Thanks in advance!