How Mortgage Rates Can Change More Than Just Your Payment

Mortgage rates continue to remain low for now, but recent news and information suggests that rates could rise within the next several months. Of course, there are many factors other than mortgage rates that determine if you should or can buy a home or refinance, but if the mortgage news is right about rising rates, how does that affect your financial bottom line?

If you were to get a $300,000 loan with a 30 year fixed mortgage rate of 5%, the monthly principal and interest payment would be about $1,610. If mortgage rates increase to 5.5%, the same loan payment would be about $1,703 per month.

Not only is the payment higher, but the $93 difference in monthly payment also means that you would need $331 more gross monthly income to qualify at the higher mortgage rate, based on the standard 28% Fannie Mae debt ratio. Another way to look at it is, the maximum loan you can get could be about $17,000 less without the additional monthly income.

So when you hear news of mortgage rates possibly rising, it can affect your potential payment and your maximum loan to refinance or buy a home.

Home Mortgage Rates