The price of a house and estimated monthly mortgage payments are likely a major factor to consider when buying a home. For example, the perfect townhome you found in Owings Mills is listed for $250,000 and the current interest rate is about 3.43%, so your monthly payments would be about $1,113.
“Can I afford those payments?” is something you’re probably asking yourself. However, it’s important to also factor in the ‘long term cost’ of the home before coming up with your answer.
Here’s something to consider.
Interest rates are predicted to increase by this time next year, according to the Mortgage Bankers Association (MBA), the National Association of Realtors (NAR) and Freddie Mac. In addition, CoreLogic‘s most recent Home Price Index Report indicates that home prices will appreciate by 5.3% over the next 12 months.
At those rates and by Fall of 2017, that $250,000 townhouse you love could cost $263,250. With an interest rate of 3.7%, your monthly payments increase by almost $100. You’d pay an additional $1,185 annually and $35,575 over 30 years.
So whether you’re ready to take advantage of record low interest rates now, or planning to buy a home later, be sure to consider the cost of your home over time rather than just the short term price.