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Friday, April 25, 2014

Interest rates and buying power

 To help you understand how interest rates affect buying power, below is a table for explanation.

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 to buy while interest rates are rising, you may end up paying more.

Use the table below to see how interest changes affect loan amounts

At a 4.5% fixed rate loan, you could qualify for a loan amount of:
The loan amount would you qualify for based upon a higher fixed 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.

*courtesy of harborhomes.com/news/view/interest-rates-and-buying-power

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