Homebuying January 10 2020

How do Interest Rates Affect Purchasing Power?

Purchasing power refers to the price of the home you can afford based on the budget you have available. Naturally, if interest rates start to increase, you will not be able to afford the same home on the same budget. In a nutshell, you will be paying more for the same home if the interest rates rise.

How do Interest Rates Affect Purchasing Power?

The impact of purchasing power makes it important to jump on your dream home when interest rates are low. The mortgage interest rate determines your monthly payment, as well as the total lifetime cost of your mortgage. Until you lock in your interest rate, the current rates being offered may change due to market fluctuations. Locking in your rate when you deem it appropriate will allow you to properly budget for the future costs of your new home!

Just how powerful are interest rates when it comes to purchasing power? As you can see in the chart below, the higher the interest rate, the higher the monthly payment. Meaning the less house you can afford. “A 1% point drop in rates — such as from 4.5% to 3.5% — leads to a monthly savings of $167 on a $200,000 mortgage,” says Lawrence Yun, chief economist for the National Association of Realtors.

*This chart is for informational purposes only. Sample rates and APRs are based on interest rates and terms available as of 6/07/2019, factoring in prepaid finance charges (per diem interest and closing fees). Interest rates could vary or change without notice; buyer is subject to qualifications for specific loan terms, occupancy, down payment, credit and underwriting requirements, and/or investor program guidelines. This is not an offer to enter into an interest rate or discount point agreement and any such agreement may only be made in writing, signed by both the borrower and lender.

You can use our mortgage calculator to see the incredible effect of interest rates for yourself. As you slide the interest rate higher, you can see how much your monthly payments would climb to pay off the cost of the same home.

Mortgage rates have been near record lows over the past few months. That means many prospective homebuyers can likely afford a more expensive home than they previously thought. With Eagle Home Mortgage, get prequalified for your dream home and find out what your purchasing power is!

Search Results for query

February 20 2020

Haven't Considered a Refinance? You Should!

When you refinance, you are replacing your current mortgage with a new home loan. This new home loan also comes with a new term, interest rate and monthly payment that is normally more affordable in the long-run. Refinancing can present a number of benefits...

Read More

February 14 2020

Buying a Home Together

Moving in together is a big step in any adult relationship, but buying a home together comes with a whole new set of hurdles. A home is often the most expensive purchase that you will be making…together! Below are some tips to help you prepare for this...

Read More

February 06 2020

Tax Incentives for Homeowners*

The dream of homeownership comes with many financial incentives. These financial perks extend beyond the more obvious such as building equity and investing in your future, to the size of your tax return each year. Tax season is fast-approaching, so we thought it...

Read More

January 30 2020

Save Time, Close Online with Eagle Express Close

After you’ve gone through the loan process, gotten that clear to close and your Lennar home is ready for you to move in, it’s time for the closing process. Closing is the final step before that new home is officially yours!

Read More

January 23 2020

New Decade, New Design Trends

If you’re looking to tackle a new project in 2020, look no further than your own home. The new decade is a perfect time to update your living spaces.

Read More

January 16 2020

Is a Mortgage Refinance Right For You?

You’ve probably heard by now that refinancing your home loan may result in benefits like lowering your monthly mortgage payments. But how does that work, exactly?

Read More

January 10 2020

How do Interest Rates Affect Purchasing Power?

Purchasing power refers to the price of the home you can afford based on the budget you have available. Naturally, if interest rates start to increase, you will not be able to afford the same home on the same budget. In a nutshell, you will be paying more for...

Read More

December 27 2019

4 Refinancing Myths BUSTED

Don't let common misconceptions keep you away from refinancing your mortgage. Consider the 4 most common myths and why they should be kicked to the curb.

Read More

December 20 2019

Decorating Your Home for the Holidays on a Budget

You don’t have to skip decking your halls this season just because you’re on a budget! The holidays can already be an expensive time for many, so we like finding stress-free and inexpensive ways to get into the holiday spirit. Here are some tips for...

Read More

12345Last

Mortgage Calculators

Crunch the Numbers With Our Helpful Mortgage Calculators

Payment Calculator

payment calculator

Payment
Calculator

Affordability Calculator

affordability calculator

Affordability
Calculator

Refinance Calculator

refinance calculator

Refinance
Calculator

The Modern Digital Mortgage with a Personal Touch

Paperless. Effortless. Awesomeness TM

Simplify the home financing process with our Digital Mortgage. We'll be here to help navigate you through the entire process.

Get Pre-qualifiedWhat is a Digital Mortgage?