With mortgage rates creeping up toward 5% as 2013 draws to a close, potential home buyers have some decisions to make — and soon.
A laundry list of economic issues, including inflation, consumer credit, and rising home prices has the U.S. housing market on the way to making a clean break from the days of the 3.50%, 30-year fixed-rate mortgage for the foreseeable future.
The danger for potential homebuyers isn’t that mortgage rates are nearing 5.00%; the real threat is that rates could go higher, to 5.50% or even 6.00% in 2014.
Think of it this way:
Buyer A snares a $300,000 fixed-rate, 30-year mortgage at a 5.00% interest rate, with the following payments:
• Monthly payment = $1,610.46
• Total payment = $579,569.69
• Total interest = $279,769.69
Buyer B grabs a $300,000 fixed-rate, 30-year mortgage, at a 6.00% interest rate, with the following payments:
• Monthly payment = $1,798.65
• Total payment = $647,515.44
• Total interest = $347,515.44
Buyer B will pay about $67,746 more for having a 6% mortgage rate, compared to a 5% rate, over the life of the loan.
Rates currently stand at 4.20%, according to Freddie Mac’s weekly mortgage rate survey.
For full story: Buy a Home Now or Pay More Later?
