## How a ½% rise in interest rates will affect your buying power

### Will a 1/2% increase in mortgage interest rates determine which San Diego home you purchase?

Depending upon your finances, it certainly could.

As an example, let’s assume that you’re purchasing a home and after you’ve made the down payment; your loan balance will be an even \$100,000.

If your interest rate is 4%, your monthly payment for principle and interest on a 30 year mortgage will be \$477.42.

Should the rate rise to 4.5%, the payment will go to \$506.69. That’s a difference of \$29.27 per month – per \$100,000 of your loan balance.

Translating that to a price you’re more likely to pay for a home in San Diego, \$400,000 at 4% = \$1,909.66 per month, while 4.5% = \$2,026.74 – for a difference of 4 X \$29.72 or \$117.08.

Now let’s assume that your lender has looked at your other obligations and said that \$1,910 is the most you can pay for principle and interest.

Working backwards, we now find that your loan amount can’t exceed \$376,896. In other words, the price of the home you wanted would have to drop by just over \$23,000, or about 6%. Of course, you could add the \$23,000 to your down payment.

We’ll be happy to help you find the home that fits your budget, regardless of the prevailing interest rate.

So if you want to own a home anywhere in San Diego County, simply call 619-929-1413 or write td@tomdunlap.com.