This week, for the third this year, the Feds have raised interest rates - this time it was for 0.25 percent. Based on what we are hearing from mortgage lenders, the current 30 year rate is sitting around 3.93 percent right now.
Historically, according to Mortgage Bankers Association, the 30 years rates, over the last 20 years have trended down:
3.90% 6 months ago
4.13% 1 year ago
3.54% 18 months ago
3.32% 5 years ago
5.96% 10 years ago
7.15% 20 years ago
Business news reports indicate that the Federal Reserve will probably raise their rates up to four more times in 2018, and the Mortgage Bankers Association predicts rates will rise to 4.8 percent near the end of next year. Freddie Mac's prediction moves them to 4.4 percent.
The Increasing Cost of a Mortgage - What It Means For the Home Buyer
Today a $200,000 30 year mortgage - at 3.93% - costs a home owner $947.00 per month for principle and interest - $11,364 per year - with a total interest of $140,839 for the life of the loan.
By then end of next year, if the predictions are correct and we use a rate of 4.6% it will cost an owner $1025 per month - $12,300 per year - with a total interest of $169,103 for the life of the loan.
It could cost a home owner nearly a $1000 more per year and $28,264 more in interest for the life of the loan by the end of 2018.
Housing Price Will Increase Too
For a home buyer, this all gets much more expensive when you also factor in the increasing price of housing in Northern Colorado. Last year the average price of a home increased 13.9% in Fort Collins - and more in other areas of NoCo.
So theoretically, if trends continue, it would push the needed mortgage amount up to $227,800 based on last year's increase. By the end of 2018 the cost per month for the mortgage could jump to $1167 per month - $14,000 per year - with the total interest for the life of the loan moving to $193,000.
This would be $2600 more in payments per year and $52,000 more in total interest on the loan when compared to the cost of buying a home today.
The Bottom Line - Buying a home now, as apposed to next year, will save a home owner thousands of dollars in mortgage costs. Please contact us so we can help you get started finding that home you would love to have today.