Aren't you glad you don't have to pay what your parents probably had to pay an interest rate on a mortgage? Consider this, the monthly payment for a $300,000 house with a 4% interest is about $1500 per month. We've experienced these low-interest rates for several years now, which is a great thing, especially since home prices have been inching up moderately, instead of dropping. But in the 1980s, interest rates were anywhere from 8% to 12% and on a $300,000 loan that means your mortgage payment at 8% would be over $2200. But of course, the same home wouldn't have been $300,000 either.Interest rates

Let's say that the average home was about $100,000. At 8% interest on a 30-year mortgage that the $734 monthly mortgage payment. Doesn't sound so bad right now, but if you consider 30 years ago, $730 was actually quite a bit of money to spend on a monthly mortgage payment. If they had the 4% interest that we have now, that payment would be about $470. So, it's all relative.

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Interest rates have stayed around the 4% mark for much of 2017 which gave buyers relief from rising home prices and it help with affordability. In the first quarter of 2018, rates went up to 4.45% and experts predict that these rates will increase even more by the end of the year. Are we going to see the 8% or 12% we saw in the 1980s? No, nothing like that, but the rate you secure now impact your monthly mortgage payment until you refinance, sell, or pay it off.

The 30 year fixed rate mortgage from the last 45 years shows that in 1981 and 1982, the mortgage rates went up to nearly 18%. That's insane! That means that same $100,000 mortgage with an 18% interest rate would put your mortgage at a $1500 a month payment! You can certainly but not many people were buying houses back then. Can you imagine going from a $470 payment to a $1500 a month payment? That's triple the cost just based on interest rates.

Bottom line, be thankful that our interest rates have been historically low for years now. I don't see them going up to that crazy number as we did in the 80s, but you never know. The sooner you lock in a lower rate the better whether it's a refinance or a first-time home purchase. Give us a call today if you're interested in finding out how much home you can afford with today's interest rates.

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