If you can believe it, this is another result of the brutal heights of the country inflationAlso, the higher the mortgage interest rate, the lower the purchasing power of homebuyers, which affects how much home they can afford and how much they can pay each month. Here’s what the new 7% interest rate really means for your monthly payments:
What this interest rate actually looks like
We know that mortgage interest rates make a big difference in whether or not you can make monthly payments.As ABC News explainsthese rates (coupled with rising house prices) mean a few hundred dollars more in mortgage payments. what does it look like?
Here’s a concrete example. Let’s say you bought a house for $350,000. This is the “typical” (typical, not average) house price in the US this year. According to the Zillow Home Values Index.
You pay a 20% down payment of $70,000 and end up with a starting loan balance of $280,000. Not including taxes, insurance, or HOA fees, the following monthly payments accrue based on a $280,000 fixed rate mortgage for 30 years.
- At 3% interest rate = $1,180 monthly payment
- $1,337 monthly payment at 4% interest rate
- At 6% interest rate = $1,679 monthly payment
- At 7% interest rate = $1,863 monthly payment
- At 8% interest rate = $2,055 monthly payment
money dot com We also break down some examples of what the various interest rates translate into in terms of money from a bank account.
Other factors impacting your monthly payments
Don’t forget that a variety of factors impact your monthly payments on top of the interest rate. Here are some examples from Money.com:
To find out how this higher rate affects your monthly payment, you can experiment online. mortgage calculator.