You found that perfect house or at the very least the house that you want to make a home. The real estate market has bounced back from the downturn and interest rates are at near historical lows. You’re pre-approved for a home loan. Sounds like the perfect time to buy that house, right?
Maybe not.
There is growing concern that those buying property at incredibly low interest rates will not be able to afford their mortgages when rates rebound. This is compounded by the current trend of 35 year mortgages and 5% down payments.
For example, a $250,000 mortgage on a five year term and an amortization period of 35 years is only $892 per month at 2.5%, but at 5.5% the payment turns into $1,332. That’s a difference of $440 a month.
The solution? Pay down as much as you can now, which should help to cushion the blow when interest rates inevitably rise.
