When you’re paying interest on a home loan, it’s amortized over the life
of the loan. That means that in the beginning of your loan term,
most of your mortgage payment will go toward paying off interest. Over time, a
larger percentage of your monthly payment will be applied to your loan’s
principal balance.
When interest rates are low, home ownership is more affordable. If you
don’t have to spend that much money on interest, you may be able to take
on a larger loan. Higher interest rates, on the other hand, increase the
long-term cost of owning a house
Rates ended the week with the 30 year fixed
conforming rate at 4.625%. All predictions are that interest rates will rise
throughout 2019.
Nothing affects a home’s affordability more than interest rates. After all, we live with the monthly payment, not the amount of the loan.
Look at the chart below depicting the monthly payments for 30 year loans of $400,000 and $750,000.
As you can see, just a 1% change in the interest rate can have a drastic effect on the monthly payment.
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