By Kat Oak, Contributor January 18, 2017
Did you know that, in the fall of 1981, the national average for a 30-year, fixed-rate mortgage was 18.63%? In an effort to battle rampant inflation, the Federal Reserve raised interest rates, which caused mortgage interest rates to go up, and the housing market suffered intensely. In fact, homebuyers at that time ended up paying a whopping 82% toward interest over the life of their mortgage!
Since then, the Federal Reserve has gone to great lengths to manage inflation and interest rates, and we’ve seen mortgage rates generally under 6% for quite a while. At the end of 2016, the Fed increased its benchmark interest rate for the first time in a year, also noting that it had plans to implement three additional increases throughout 2017.
In September of 2016, we saw interest rates as low as 3.3%, and these have been slowly and steadily climbing ever since. We’re now above 4% and the Fed increases planned for this year will result in rising mortgage interest rates.
How will an increase impact you?
Let’s look at the difference in buying a home in September of 2016, with a 3.32% interest rate, versus buying it in mid-December of 2016, when rates for a 30-year fixed mortgage were at 4.17%. With a median home price of $304,500 and 20% down, you would be paying $1,187 per month for the house purchased in December, versus $1,070 per month for the house purchased in September. That’s a difference of $117 per month, $1,404 per year, or $42,120 over the term of the 30-year mortgage!
Ultimately, your mortgage interest rate impacts how much home you can afford since it directly affects your monthly payment.
How Trio can help
When you work with Trio, you’ll be locking in your mortgage interest rate at today’s rate, so when you’re ready to buy in a few years, you’ll be working with a better rate than you’d be able to find in the general market.
Sound too good to be true? It’s not! Here’s how it works:
- You work with your agent to find the home you’d like to buy
- You, the homebuyer, work with Trio to purchase the home
- You enter into a lease-to-own agreement with Trio, with part of your monthly payment going toward a future down payment
- When you’re ready (during the lease or at the end), you’ll have the option to purchase your existing home using your down payment at today’s interest rates.
Even though interest rates are slowly increasing, it’s still a great time to buy a home. If you’re interested in buying but aren’t sure if you’re financially ready to do so, Trio is here for you.