Interest Rates And Your Purchasing Power

If you are in the market for Chicago real estate and you need to buy a house, you will get the best deal if you purchase it when the interest rates are low – and those mortgage interest rates are low now! The chart below shows mortgage interest rates on a 30-year fixed mortgage for the past 20 years. And rates have come down, down, down!

interest rates

The selling price of your Chicago real estate really doesn’t matter. When it comes to how much house you can afford, the interest rate on your loan is more significant than the price itself.  

According to specialists, for every 1 percent of mortgage rate growth, your home buying potential decreases 10.75 percent. That means if you could afford a $600,000 house when interest rates are 4.5 percent, you can only acquire a $535,000 house when the rates go up a percentage point to 5.5 percent. This is assuming your monthly mortgage payment remains the same. For each 0.125 percent increase to mortgage rates, your maximum affordable purchase price drops 1.35 percent.

Over the past 20 years the interest rates on 30-year fixed rate mortgage not been lower than 5 percent since 1991, which is extraordinary.

The point is that you can purchase more Chicago real estate for the same monthly payment if you buy when the rates are low. That means now! Interested? Give me a call or send me an email and I will show you how to get the most house for your money!

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