ARTICLE
THEY’RE COMING:
HIGHER
interest rates We saw with the global pandemic a major drop in interest rates for homes (this wasn’t limited to houses, but for the sake of this topic, we’ll limit it to houses). The cost of borrowing money was lower than it had ever been before because of this unprecedented situation. Among the negative storm of the world being affected by COVID-19, low interest rates were a positive ray of sunshine. Buyers were able to take advantage of this side effect, which made affording a home easier than it had ever been before. Now, as the world adapts to live despite this virus, the economy is adapting in order to recover. This means that interest rates will be on the rise, affecting all types of borrowing. We are already seeing banks here rise their rates, though of course in small increments. With this new trend, buyers, sellers and homeowners alike are all concerned what the future will hold. How high will rates climb? How will these new rates affect you/your situation? How will this trend affect real estate in your area? Let’s set your worries at ease, and discuss the most logical outcomes:
Effect on Homeowners
To put it simply, more of your mortgage payment is going to be put towards the interest on your loan, instead of the principal balance. So, if you have a variable interest rate, you’re going to see that increase in your interest rate sooner rather than later. Increases and decreases can happen multiple times during the term, as you probably already know. For homeowners that chose a fixed interest rate, the increase in interest rates isn’t going to affect your mortgage payments until the time comes to renew. At that point in time, your lender will show you the new rate, and the factors that influenced it. Those factors would include: the current prime and posted interest rate, the length of your mortgage term, the type of interest rate you choose, your credit history, your earnings, and your employment status.
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