Interest Rates and Buying Power
How Does A Rise in Interest Rates Impact Your Buying Power?
You hear a lot about interest rates these days. To help you understand how interest rates affect buying power, we've put together the table below.
For example, say you qualify for a $300,000 loan with an interest rate of 4.5%. If interest rates rise to 5.5% you'd now only be qualified for a loan of $267,705. That one percent change in interest rates equals a $32,295 reduction in buying power. In other words, if prices drop by $10,000 and interest rates rise 1%, you've lost $20,000 by waiting.
While home prices are a very important consideration, interests rates have a large say in how much you can afford. If you're waiting for home prices to drop while interest rates are rising, you may end up paying more.
Use the table below to see how interest changes affect loan amounts.
| If, at the fixed rate shown below, you qualified for a loan amount of: | What loan amount would you qualify for based upon a higher rate of: | |
| 4.5% (4.665% APR) |
5.5% (5.679% APR) |
6.5% (6.694% APR) |
| $200,000 | $178,411 | $160,267 |
| $300,000 | $267,705 | $240,480 |
| $400,000 | $356,822 | $320,535 |
| $500,000 | $446,116 | $400,748 |
| $600,000 | $535,410 | $480,960 |
| $700,000 | $624,527 | $561,015 |
This document is not intended as an offer to extend credit nor a commitment to lend. The loan interest rates, fees and terms presented here are for illustrating purposes only and may not be currently available. The document was prepared to assist real estate professionals in illustrating some of the financial options available.
